Silver prices have shot 20 per cent in less than four weeks, while spot gold prices have surged $141, or about 9 per cent, in the same period, with precious metals promising to move higher in the next few days on rumours that a fresh round of quantitative easing is more likely now.
With gold price steady this morning near its six-and-a-half month high of $1,740 per troy ounce – up from $1,599 on August 14 – a growing number of analysts is now positive that the yellow metal will retain its shine and climb to at least $1,800 an ounce before the year-end.
Silver prices are near their six-month high, settling at $33.68 this morning, up $5.57, or 19.85 per cent in the past 30 days.
Hovering around the $1,735-mark this morning, gold too has had a remarkable turnaround in its short-term fortunes ever since US Federal Reserve Chairman Ben Bernanke hinted at additional support to prop up a slowing economy – which the market is seeing as a clearest signal yet that the third round of the Fed’s quantitative easing program is on its way.
The recent round of a sharply disappointing US employment data has further fuelled the market’s expectations for imminent printing of dollars by the US Fed. A poll of 59 economists gave a 60 per cent chance the Fed will announce QE3 at the conclusion of its September 12-13 gathering.
If history is a precursor to what’s coming, gold and silver are at the threshold of an upward spike. Gold rose 70 per cent as the Fed bought $2.3 trillion of debt in the first two rounds of quantitative easing, from December 2008 to June 2011.
“Should the Fed announce QE3, gold could hit $1,800 this year and the target of $1,900 next year looks achievable,” said Sanupong Suthadtumakul, a mutual fund analyst at Phillip Securities (Thailand).
However, if the Fed fails to do so, chances are that gold will lose momentum and may fall victim to profit-taking, although analysts are certain that it will resume its upward trajectory if and when the Fed gets on with the QE3, most likely after the November US Presidential elections.
“Vice-versa, without QE3, gold could fall hard, but should not fall below $1,500,” said Suthadtumakul.