Gold Price Firm, Japan Expands QE by ¥10 Trillion

GOLD PRICE NEWS – The gold price held firm near its six-month high at $1,775 per ounce on Wednesday after the Bank of Japan (BOJ) became the latest central bank to join the money printing party that has taken hold across the globe.  The price of gold rose to an overnight high of $1,782 after the BOJ unexpectedly announced an expansion to its own quantitative easing program, but later pared its gains alongside the broader commodities complex.

Silver stabilized near unchanged at $34.77 per ounce this morning as well.  Yesterday, gold’s sister precious metal rallied to $35.10 – its highest level since March 2nd – before giving back its advance.  Nonetheless, the prices of silver and gold remain higher this month by 9.4% and 4.9%, respectively.  On a year-to-date basis, silver is up by 25.4% while the gold price has risen 13.5%.

Gold stocks continued their recent outperformance relative to the price of gold on Wednesday, as the Market Vectors Gold Miners ETF (GDX) jumped $0.63, or 1.2%, to $54.95 per share.  In doing so, the GDX reached its best level since March 2nd as well, and extended its advance in September to 14.6%.

Notable gold producers moving higher this morning included Eldorado Gold (EGO), IAMGOLD (IAG), and Randgold Resources (GOLD).  Shares of EGO climbed by 2.4% to $15.97, IAG by 2.2% to $16.18, and GOLD by 0.8% to $121.69 per share.

The recent strength in the gold price has been fueled by the Federal Reserve and European Central Bank (ECB), both of which have launched additional monetary stimulus measures to combat the risks of recession in their respective economies.  On Wednesday, the Bank of Japan announced plans to raise its own asset purchase program by 10 trillion yen (¥) – approximately $125 billion – bringing its total to ¥55 trillion.

Governor Masaaki Shirakawa, head of the BOJ, noted that “Exports and output look weak, and a decline in oil prices is weighing on Japan’s consumer prices…we judged that further monetary easing was necessary now to ensure that Japan’s economy does not slip from a path towards sustained growth with price stability.”

Commenting on the Bank of Japan’s decision and the wave of money printing around the world, BNP Paribas precious metals strategist – Anne-Laure Tremblay – wrote in a note to clients that “Current monetary easing by central banks is warranted by weak economic growth and subdued inflationary pressures in developed economies.  This trend is likely to continue until we see a notable improvement in economic growth trends.”

As for the price of gold, Tremblay contended that “It seems that the stars are now aligned for gold to move higher.  The next hurdle to overcome will be the $1,800 an ounce level, which we expect to be breached decisively in the fourth quarter.”