Gold breaches $1,900 an ounce on speculation that US Fed will enter QE3
The value of gold briefly rose above $1,900 an ounce in Asian trading overnight before falling back slightly as European stocks opened strongly at the commencement of trading today.
Gold hit $1,913.50 an ounce in Asian trading on the back of concerns of a global economic slowdown and expectations that the United States is about to commence a third tranche of quantitative easing.
Gold fell back slightly to below $1,900 an ounce as all three main European stock markets opened with increases of around two per cent in the first hours of trading on Tuesday morning.
Gold is seen as a safe haven during times of economic uncertainty and it is likely to continue to increase in value until investors see proof of a sustainable recovery in the US and Europe.
The Governor of the US Central Bank, Ben Bernanke will chair a vital meeting of Central bank governors from around the world on Friday for their annual meeting at Jackson Hole in the United States. Speculation is rife that Mr Bernanke could announce new stimulus measures for the economy. This expectation that a third round of QE could be lined up has contributed to the increased price of gold in recent weeks.
However, if the US does print more money to boost liquidity in the US economy and the markets it could lead to a further devaluation of the dollar. This devaluation is one of the key drivers in the rising value of gold.
Meanwhile, Oil prices rose after a sharp fall in recent weeks as fighting continued in Libya and the markets judged the future of oil production in Libya to be uncertain and also because analysts believe official figures will reveal a decline in stocks of US crude.
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