Fundamental Analysis Commodities
December 12, 2012 @ 10:48 am

Gold rises on expectations of QE by Federal Reserve

Gold prices moved higher on Wednesday ahead of the U.S. Federal Reserve policy meeting. The US dollar remains under pressure on expectations of easing by the Federal Open Market Committee (FOMC).

There is strong speculation that the Fed will ease further and introduce fresh quantitative easing measures in the way of bond buying.  Such measures tend to have a weakening effect on the US currency and this will support gold as it is seen as a hedge against inflation.

The greenback has been on the back foot as markets expect the Fed to expand its asset purchase program by monthly purchases of treasuries in the amount of $45 billion.

So far this year, gold prices have risen 9 percent due to central bank polices in various countries.

Gold crawled up 0.3 percent to $1,715 an ounce by 0930GMT on Wednesday.

A weaker dollar boosts buying interest in dollar-priced commodities from buyers holding other currencies because they become cheaper.

Meanwhile the US “fiscal cliff” negotiations in Washington where progress has been slow has also weighed on the dollar. White House and Republicans are trying to prevent $600 billion worth of tax increases and spending cuts that will kick in in January 2012 and threaten to push the US economy back into recession.

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