Bank of America/Merrill Lynch says the recent bond purchasing program announced by the US Federal Reserve should be Bullish for Gold, maintaining its Y 2013 target of 2,000 oz and introducing a new 24-month target at 2,400 oz for the end of Y 2014, according to a research note Tuesday.
"Our analysis suggests that a single month's purchases of mortgage backed securities to the tune of $40 billion will likely lift Gold prices by around 0.7% within four months. Gold has rallied on aggressive Fed and ECB monetary easing," analyst at the bank Michael Widmer wrote.
He said that the new target reflected the bank's view that the Fed would maintain mortgage purchases until the end of Y 2014 and could move to buy treasuries following the end of Operation Twist.
"With MBS purchases into 2014, Gold could climb to $2,400 oz. While it is tempting to argue that Gold prices have already discounted the recent measures, it is important to note that gold and other commodity prices continued to rally during the implementation phase of both QE-1 and QE-2," Mr. Widmer said.
Gold, Silver and Crude Oil Trading
US Gold prices finished pit trade flat to unchanged Tuesday. The market saw consolidation on the charts following last week's strong upside price action.
The Key "Outside Markets" were also in a Bearish mode for precious metals Tuesday, as the USD index was higher and Crude Oil prices lower.
Dec Gold last traded + 0.40 at 1,771.00 oz.
Spot Gold was last quoted + 5.50 at 1,768.50 oz.
Dec Comex Silver last traded + 0.268 at 34.63 oz.
Trading Tuesday was risk off limiting buying interest in precious metals. In overnight news.
European stock markets declined amid an apparent reluctance of Spain to ask for more financial bailout assistance from the European Union. There was a successful auction of Spanish short-term debt overnight, with yields lower and demand decent. A Spanish auction of longer-term debt later this week will be a bigger test, however.
There was a positive economic report coming out of Germany, as the ZEW economic expectations reading was the strongest in 5 months.
Asian stock markets were weaker on position evening ahead of important economic data coming out of China Thursday.
There were also anti-Japanese demonstrations in China that unsettled the market place in Asia. The Bank of Japan started a 2-day meeting, at which the BOJ may introduce new monetary stimulus.
The USD index firmed Tuesday on Short covering in a Bear market after prices last week hit a 4-month low.
The Greenback Bears have the near-term technical advantage as a 2-month-old downtrend line is in place on the daily chart.
Crude Oil prices were lower Tuesday on follow-through pressure from Monday's big losses.
WTI Crude Oil 95.33 -1.29 (-1.34%)
Crude Oil Bulls have the overall near-term technical advantage, but are fading in here.
These 2 Key Outside Markets continue to have a daily influence on precious metals prices.
The London PM Gold fixing is 1,769.50 vs. the prior PM fixing at 1,770.00.
Paul A. Ebeling, Jnr.
Paul A. Ebeling, Jnr. writes and publishes The Red Roadmaster's Technical Report on the US Major Market Indices, a weekly, highly-regarded financial market letter, read by opinion makers, business leaders and organizations around the world.
Paul A. Ebeling, Jnr has studied the global financial and stock markets since 1984, following a successful business career that included investment banking, and market and business analysis. He is a specialist in equities/commodities, and an accomplished chart reader who advises technicians with regard to Major Indices Resistance/Support Levels.
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