Gold Prices Jump as Quantitative Easing Announced

Thursday, 13 September 2012
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Published in United States Economy

Another round of quantitative easing was announced earlier today, and with that news gold prices jumped again. It seems as though the yellow metal can’t be stopped right now. As speculated, the Federal Open Market Committee finally decided it was time to roll out more easing measures.

In order to improve the struggling labor market, the Federal Reserve said it will buy $40 billion of mortgage-backed securities in an open-ended program and continue with its “Operation Twist,” where it swaps out short-dated securities for longer-term securities, as well as reinvesting the proceeds of maturing securities. In addition, the Fed extended its outlook for where it will hold interest rate to mid-2015, saying it will keep its ultra-loose monetary policy. This outlook is called forward guidance. Could this also mean we may see the current interest rates stay this low for quite some time? It does look that way.


December gold futures on the Comex division of the New York Mercantile Exchange were $1,761.70 an ounce right after the announcement. That was around a $44 dollar bump in a matter of minutes, as gold was trading at around $1,727.40 about five minutes prior to the announcement by the Federal Reserve’s monetary-policy setting arm.

The Feds held out as long as they could. I didn’t think they would announce this type of stimulus unless they thought it absolutely necessary. It seemed as though they were hoping the economy would recover more quickly. While the U.S. economy is recovering, it is doing so at a snails pace. The Feds had waited as long as they could, stating they were worried that without stimulus, “economic growth might not be strong enough to generate sustained improvement in labor market conditions. Furthermore, strains in global financial markets continue to pose significant downside risks to the economic outlook.”

Right now is the time to be in gold. If you aren’t, then hop aboard. Those of you who were able to purchase the yellow metal a couple of months ago when it was low are now reaping the benefits. Many investors agree that the $1,800 per ounce price mark may be achievable by the end of November.

"There's been a lot of money made in gold recently. People will take their profits on the move. There will be a pullback at some point. It's always hard to say exactly when that happens, but it will happen,” said Frank Lesh, a broker and futures analyst with FuturePath Trading.

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Trevor Gerszt

Trevor Gerszt has been passionate about gold since childhood. Growing up in South Africa, the world’s second largest gold producer, Gerszt spent his youth collecting gold coins. Surrounded by a family of experienced coin collectors, he gained valuable insight about the precious metal.