Gold and Silver Prices Up

Gold prices continued to tack higher during Asian trading hours on Wednesday after snapping four straight sessions of losses in the preceding session as bullion investors took some heart from the news that the Federal Reserve, which is expected to announce its monetary policy statement later today, will keep buying $85 billion bonds, monthly, in order to shore up labor market, lifting metal’s inflation hedge appeal. Silver prices also gained in early trading on Wednesday.

At around 6:30 a.m. EST, gold futures for February delivery edged up 0.25% to $1,665.00 an ounce while spot gold gained 0.12% to $1,665.51. Silver futures gained 0.80% to $31.435 an ounce.

In pre-market trading, the iShares Silver Trust (ETF) (NYSE: SLV) was down 0.03% to $30.31, and the ProShares Ultra Silver (ETF) (NYSE: AGQ) was down 0.30% to $46.50.

Although no immediate reaction is anticipated in the bullion market once the Fed announces its policy statement (bullion investors have already factored in that the central bank will continue with its economic stimulating measures), metal’s long term outlook is bullish as number of central banks across the world have adopted extremely accommodating monetary policies which would result in inflationary pressure amid improving global economic indicators.

“Growth looks better so the market is shifting out of risky low-yield asset or zero-yield assets to equities, but inflation concerns are opposing that and may be sustaining some interest in gold,” wrote Jeremy Friesen, commodity strategist at Societe Generale in Hong Kong, in a note to investors.

Besides rising oil prices will also stoke inflation fears. Brent Crude price matched its three month high level a session before, according to Reuters.

In short term though Friesen believes that gold prices will be capped as improving U.S. data will lure investors towards riskier and better performing assets.

Physical side Demand Subdued

Demand for physical gold, which rose sharply after the metal slumped to its 2 ½ week low earlier during the week, subsided on Wednesday as investors wait for clear directions from the Federal Reserve. Still, the overall demand from Asia, particularly China is relatively weak. Even though Chinese New-year is just around the corner, orders from China this year is nowhere near its previous years’ levels.



Ed Liston is a senior contributing editor at An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing in his yacht.