Gold rises on chance of Fed implementing more QE

Gold futures have gained on the commodities market today (September 12th) as the Federal Reserve (Fed) in Washington DC commenced the first of two days of talks.

Investors will be watching this summit carefully, as it will lead to the decision whether or not the central bank is going to implement a further round of stimulus via quantitative easing (QE).

If the Fed does decide to pump more money into the US by buying bonds, gold in particular will do well on the markets.

This is because more stimulus is likely to weaken the dollar and drive up the price of commodities that are considered dollar-denominated, such as gold or oil.

And recent surveys by Bloomberg and Reuters have revealed many economists are optimistic the Fed will wave through a further round of bond-buying following a series of disappointing reports showing poor results for manufacturing and growth.

Economists have lowered their forecasts for the US to expand by 1.7 per cent gross domestic product at the same time they increased the chances of a third round of QE from 60 per cent to 65 per cent.

News on whether the central bank will implement this stimulus may be announced as early as tomorrow by the leader of the institution Ben Bernanke.

The chairman said in a speech last month that it was taking too long to make progress in bringing down unemployment and spurring growth, which indicated additional measures might be taken if the economic outlook failed to improve.

Mr Bernanke said at the Jackson Hole state of the economy summit that he is in favour of an open-ended bond-buying strategy, which would leave the central bank able to announce a pace of purchases that would be adjustable as the economy nears the chairman's goals.

At 16:25 BST, Forex Gold was 0.7 per cent higher on the commodities markets to $1742.75 per ounce.