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An Obama Win Signals Loose Monetary Policy as Gold Surges

November 7, 2012 - After a pre-emptive surge to the $1,730 per troy ounce level on Tuesday, a two-week high, gold dropped back to the $1,720 per troy ounce level on Wednesday morning in London.

A note from Commerzbank read that gold is making significant gains on the back of a weak U.S. dollar.

Prices for silver reached their highest levels in a week before dropping back below $32 per troy ounce.

Junya Tanase, chief currency strategist at JPMorgan Chase in Tokyo, said Obama’s re-election is likely to boost expectations of continued easing by the Fed. She added, JPMorgan Chase forecasts gold would end the year at $1,780 per troy ounce and peak late in 2013 at around $1,890 per troy ounce. She sees upside risks to these forecast highs in the event of additional U.S. policy easing or signs of inflation following the liquidity injections of the past four years.

Michiyoshi Kato, senior vice president of foreign-currency sales at Mizuho Corporate Bank in Tokyo, said monetary policy will remain loose under Obama and the dollar will be sold.  Though the dollar-selling may not last long as the U.S. faces the fiscal cliff, the U.S. tax hikes and budget cuts confront a divided Congress.

The focus is also shifting from the results of the U.S. election to economic factors overseas. Greek politicians are scheduled to vote tonight on a new round of austerity measures, hoping that agreeing to further reforms will secure payment of additional bailout monies. Strikes are scheduled to accompany the vote.

Plans to increase the European Union budget by 5 percent have been called ludicrous by British prime minister David Cameron and Vitor Caldeira, president of the European Court of Auditors,and has said the European Union is not yet up to standard after the publication of the Court’s report on last year’s EU budget Tuesday.

China is also set to overtake India as the world’s largest gold buying nation, according to the vice president of the country’s largest gold producer, China National Gold. Song Xin said China’s large increase in gold consumption would have a positive impact to the global gold market.

Xin added that China’s production is expected to reach 380 tonnes this year, meaning the country will continue to be the world’s leading gold producer.

Daily Updates Archive

Jonathan Monroe

Senior Staff Writer -

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