Gold Market Price Jumps Could Quantitative Easing Be Coming For QE3?

The price of gold rose this morning on the US Market by $30.61 or a 2% gain to $1,570.93 per ounce in spite of a series of dismal economic reports. On the LBMA market gold rose to 1223.72 up 1% over the previous day.

Gold rose at a modest rate inspire of dismal economic report of jobless claims is at 370,000 in the U.S 5,00 above the economist forecasted consensus figure. Also, the gold price showed a slight reaction to yesterday’s report by the Federal Open Market Committee (FOMC) meeting which had discussions of third round of quantitative easing for the third quarter (QE3). Federal Chairman Ben Bernanke and fellow central bankers indicated additional monetary policy accommodations could be forthcoming. “Several members indicated that additional monetary policy accommodation could be necessary if the economic recovery lost momentum or the downside risks to the forecast became great enough.” In the Fed minutes “One participant noted the potential risks and costs associated with additional balance sheet actions.”

The Fed minutes and comments are especially interesting considering the recent report by Jan Hatzius, chief U.S. economist at Goldman Sachs. In his report, Hatzius calls for a QE3 announcement to occur at the next Fed meeting in June. However, nothing was identified in terms of what implications this would present for the gold price, but as we have seen from past history, quantitative easings have been been favorable to the precious metal’s market pricing.

“We have stuck with our forecast of some additional monetary easing at the June 19-20 FOMC meeting for now, despite the less-than-encouraging noises from Fed officials in recent weeks,” Hatzius wrote. “However, it is a close call, and we worry about a re-run of the 2010 and 2011 experience—the last two times Fed officials decided to let a purchase program lapse without having put a successor program in place. In both cases, the economy slowed and financial conditions tightened to a degree that pulled them back into the market before long. It is easy to see how this could happen again, given the renewed turmoil in Europe and the possibility that US markets will ratchet up their concerns about the impending fiscal cliff in the runup to the election. In such an uncertain environment, taking out a bit more insurance still looks like the sensible choice for US monetary policymakers.”

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