Gold Prices Digest Bank of Japan’s QE, Inflation Measures

  on January 22 2013 1:03 PM

GOLD PRICE NEWS – Gold prices remained in consolidation mode on Tuesday as investors and traders digested the impact of the Bank of Japan’s latest expansionary monetary policy decision.  The spot price of gold oscillated between gains and losses near $1,690 per ounce after the Japanese central bank announced yesterday that it would launch an unlimited quantitative easing program in January of 2014 and raise its inflation target from 1% to 2%.

The policy measures were consistent with proclamations made by Shinzo Abe, the recently-elected Prime Minister of Japan, who advocated for more aggressive measures to stimulate the nation’s stagnant economy.  Following the central bank’s move, the U.S. dollar fell against the Japanese yen by 1.2% to 88.56.

Commenting on the impact of the Bank of Japan’s decision for the gold price, David Govett – Marex Spectron’s head of precious metals – wrote in a note to clients that “This is seen as mildly bullish for gold, but has been mooted for a while and is fairly discounted.”

Silver held near the flatline in conjunction with the price of gold, holding near $32.09 per ounce.  Gold and silver stocks, however, fared better than precious metals.  The Philadelphia Gold & Silver Index (XAU) climbed by 1.1% to 163.18, as its two largest components – Barrick Gold (ABX) and Goldcorp (GG) – rose by 1.9% and 2.9% to $34.69 and $38.28 per share, respectively.  The gold sector also outperformed the broader equity markets, as the S&P 500 Index inched up by just 0.2% to 1,483.39.

While the price of gold has advanced for the past two weeks, it remains near the lower end of the trading range it has occupied over the past several months.  Andrey Kryuchnkov, an analyst at VTB Capital, noted in a recent report that “We’re still trading in very thin volumes, hence the trade remains very technical, with very little investor or physical interest at the moment.”

Kryuchnkov added that in order to stir up more demand, the gold price would need to close firmly above the $1,690-$1,700 range of resistance that it has thus far been unable to surmount.  He went on to say that “Given (a lack of) macro events, we don’t expect overwhelming interest, and we should see some kind of small-scale pullback to take a breather if the market fails to close above $1,690 today.”

Looking toward the rest of the week, the U.S. economic calendar is relatively light in terms of reports likely to impact the price of gold.  Nonetheless, a few data points that could move the markets are Weekly Jobless Claims and Leading Indicators on Thursday, followed by New Home Sales on Friday.

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