Gold moves higher as investors bet on QE2

By Carole Vaporean and Jan Harvey

NEW YORK/LONDON | Tue Oct 12, 2010 2:32am IST

 

NEW YORK/LONDON (Reuters) - Gold moved back toward its all-time high on Monday, despite late gains in the dollar, as investors prepared for what many see as a likely second round of economic stimulus by the U.S. Federal Reserve.
The U.S. dollar regained strength against the euro and yen in late buying by investors who viewed its recent decline as too far, too fast.
But gold buyers looked past the short term, betting instead that the Federal Reserve would almost certainly implement so-called QE2 -- a second round of quantitative easing to stimulate sputtering economic growth.
By 3:40 p.m. EDT (1940 GMT) spot gold had risen to $1,353 an ounce, above Friday's closing bid at $1,343.25 but below the all-time high of $1,364.60.
In New York, COMEX December gold futures closed $9.10 higher at $1,354.40 an ounce, setting a session peak at $1,356.30 as they approached their record at $1,366.
Many players think the Fed will implement QE2 at its next meeting after mid-term congressional elections, said Sterling Smith, a Country Hedging Inc analyst in St Paul, Minnesota.
To boost the economy, the Fed is expected to print money in order to buy U.S. government debt, which would be dilutive to the dollar, Smith said.