Market Watch: Fed Move Awakens Gold, Just as Supply of the Metal Hits a Snag

Article by Myra P. Saefong in Market Watch

Gold’s one-day dollar surge is one for the record books. But as bullion deliveries hit a snag and mining operations slow, the precious metal may soon see prices rally to new heights.

On Monday, the most-active April gold futures contract rallied by $83, or 5.6%, to settle at $1,567.60 an ounce. The one-day dollar gain for the metal was the largest ever, based on data going back to November 1984, according to Dow Jones Market Data.

The move for the metal followed the Federal Reserve’s decision Monday to unleash its balance sheet and purchase an unlimited amount of Treasurys and securities tied to residential and commercial mortgages to ward off a credit crunch, a process known as “quantitative easing” that aims to pump liquidity into frozen financial markets.

Unlimited quantitative easing is a “huge signal, another part of upcoming trillions of new debt monetization,” said Peter Spina, president and chief executive officer at GoldSeek.com. “Many on Wall Street are waking up after the shock” of declines in recent weeks.

“The endless QE to trillions in global liquidity programs are all in gold’s favor among the general turmoil,” he told MarketWatch. “Gold is returning back to its function as a global currency.”

Spina said he would not be shocked if gold moves up $1,700 an ounce by “Friday of this week or next,” and a gold price of $2,000 and higher is possible in the second quarter.

Futures prices haven’t traded at $1,700 since late 2012 and prices at $2,000 would mark record highs, according to FactSet data.

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