Gold Prices Edge Higher; Silver Prices also Gain

Gold prices inched higher during Asian trading hours on Monday amid expectations over continued monetary easing by the Federal Reserve in coming months despite stronger than expected nonfarm payrolls data, released in the preceding session; nevertheless, gains are likely to be capped as the precious metal is likely to hover in the tight range of $1680-$1750 as investors will remain in sidelines in the backdrop of policy paralysis in Washington with regard to tax hikes. Silver prices also edged higher in early trading on Monday.

At around 6:00 EST, gold futures for February delivery gained 0.28 percent to $ 1710.30 an ounce.

Earlier on Friday, gold prices posted mild gains but slumped 0.4 percent for the week as some heavy liquidations by funds amid growing fear of deflation (in case the U.S economy falls off the fiscal cliff in the event of no agreement between congressional negotiations) and technical weakness after the metal fell below its key support level of $1,698 an ounce, triggered sell-off.

The Federal Reserve, which launched its third round of quantitative easing in September, with an aim to provide stimulus in the labor market, is expected to expand its monthly bond purchase program, as it meets this week for announcing its next policy rate decision.

Economists, according to Reuters, say notwithstanding recent improvement in the job market, the Fed is most likely to announce a fresh monthly bond purchase program worth $45 billion – as Operation Twist, which is buying long term bonds from sales proceeds of short term holdings, comes to end an end by December.

Echoing the sentiment is Lynette Tan, an analyst at Philip Futures in Singapore. In a note to investors, Tan wrote, “Market expectation is that there could be more quantitative easing towards the end of the month, and this will be supportive of gold.”

Speaking to Reuters, one Singapore based trader said, “If the Fed shows reluctance to continue purchases of mortgage-backed securities on improving economic outlook, gold will sell off, but I’d say that’s maybe a 10 percent chance.”

Meanwhile, silver futures edged up 0.68 percent to $33.36 an ounce.

In pre-market trading, the iShares Silver Trust (ETF) (NYSE: SLV) was up 0.62%.




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.