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Gold Traders Most Bullish in Ten Weeks on Stimulus

November 5, 2012

Investors are hoarding a record amount of bullion as central banks pledge to do more to spur economic growth as gold traders report being the most bullish on gold in ten weeks.

A survey by Bloomberg reports eighteen of twenty-seven respondents expecting the price to rise next week with only five bearish. Four were neutral. The proportion of bullish calls is the highest since August 24.

Holdings in gold-backed exchange-traded products gained in the past three months, the strongest run since August 2011, according to data compiled by Bloomberg. Yesterday, holdings reached a record 2,588.4 metric tons, valued at $140 billion.

The Bank of Japan expanded its asset-purchase program on October 30 for the second time in two months, with additional funds of 11 trillion yet, ($137 billion). Last week, the Federal Reserve stated it plans to continue buying bonds and central banks from Europe to China have also pledged action to boost economies.

Gold gained 70 percent as the Fed bought $2.3 trillion of debt in two rounds of quantitative easing from December 2008 through June 2011.

Gold gained 7.6 percent to $1,681.97 per troy ounce in London this year, in line for a twelfth straight annual gain, which would be the longest winning streak for the metal in at least nine decades.

On Friday, bullion lost as much as 2 percent to a two-month low as the U.S. jobs report from the Labor Department reported American employers added more jobs to the payroll than had been projected, which cast doubt on the stimulus from the Fed which had been tied to the health of the job market.

The Bank of Japan said its fund will increase to 66 trillion yen, a separate credit loan program will maintain 25 trillion yen, and it will offer unlimited loans to banks to boost credit demand. The Fed stated on October 24 that it will continue $40 billion in monthly purchases of mortgage debt and will probably hold current interest rates near zero until mid-2015. The European Central Bank has said it is ready to buy bonds of indebted nations and China approved a $158 billion subways-to-roads construction plan.

The prospect of stimulus impacts in precious metals markets is a major driver for investor sentiment and a major contributory for the current eleven year bull run in precious metals.

Daily Updates Archive

Jonathan Monroe

Senior Staff Writer -

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