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Gold prices have made the most out of a short trading week, and today jumped $10.50 to $1,704.50 an ounce at the Comex division of the New York Mercantile Exchange.
Gold, which one year ago today hit a historic high of $1,920 an ounce, came out roaring Tuesday after the Labor Day holiday. Gold closed up 2.55% to reach a more than five-month high of $1,700.
This came from increased investor hopes that the U.S. Federal Reserve will deliver QE3 to give the slowly-recovering economy a much-needed lift.
U.S. Fed Chairman Ben Bernanke's remarks from Friday's Jackson Hole, WY speech served as the gold price catalyst.
"Taking due account of the uncertainties and limits of its policy tools, the Federal Reserve will provide additional policy accommodation as needed to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability," said Bernanke, giving enough of a hint that QE3 was on the way in 2012.
Gold ETFs also started strong in September after a healthy performance in August.
On Tuesday, SPDR Gold Trust (ETF) (NYSE: GLD) holdings, the world's largest gold-backed ETF, increased to 1,293.138 tons. This is the highest level since mid-March.
GLD's price also jumped 1.77% to 163.36.
The gold hot streak cooled Wednesday as fear crept in and investors hit the sidelines, awaiting Thursday's European Central Bank (ECB) report and Friday's U.S. jobs report. Gold prices fell 0.01%, dropping to $1,694 after bouncing to $1,698 during the trading day.
Charles Nedoss, a senior marketing strategist with Kingsview Financial said to MarketWatch, "We're consolidating at higher levels" as investors were cautious before the week's ending events.
"There are no big bets ahead of that," he added.
ECB Revives Gold Prices
Fortunately investors didn't have to wait too long for remarks from the ECB on Thursday morning. By the stock market's open, word had hit that the ECB had kept its benchmark interest rate at 0.75%.
Then ECB President Mario Draghi gave markets more detailed plans - and when Draghi talks, people listen.
Draghi announced that the central bank would begin an "outright monetary transaction (OMT)" program in the secondary market with strict conditionality. By doing this, it would enable the ECB to determine when to begin, continue or suspend bond buying.
Draghi said OMTs "enable [the ECB] to address severe distortions in government bond markets which originate from, in particular, unfounded fears on the part of investors of the reversibility of the euro."
The market reacted as expected - gold jumped even higher, rising to six-month highs.
By 9:50 a.m. EDT, spot gold had increased 0.5% to $1,701.04 an ounce. At one point, the metal had jumped to $1,713.79-a high last seen in March.
Had Friday's jobs report not been looming, gold may have jumped higher.
Ole Hansen, senior manager at Saxo Bank told Reuters, "Gold is holding because the market has been given what it was hoping for, but in order for gold to move decisively higher from here, we need to see what numbers the U.S. will bring to the table."
He added, "The longer we stay above $1,700, the better. It gives all the newly-established long positions a bit of confidence."
Gold Prices Wait for U.S. Jobs Report
Yes, there is still another hurdle this week for the precious metal.
Market watchers will close out with Friday morning's jobs report prior to the market's open. Its numbers could have an effect on next week's Fed decision.
Economists surveyed by Dow Jones see total nonfarm payrolls rising by 125,000 in August with a projected jobless rate to stay at 8.3%.
Tie in this week's news and this should provide enough data for next week's Federal Open Market Committee (FOMC) meeting to mull over. The waiting may put traders back on the bench early in the week but look for this to change if the Fed announces another bond-buying plan on Sept. 13.
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