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Gold, Silver, Aluminum to Benefit Most from QE3

September 17, 2012 – Gold, silver, and aluminum will benefit most from the Fed’s announcement of QE3 last week, according to a note from Standard Bank on Friday.

As QE is initially a purely monetary phenomenon, the bank writes, with only the possibility of a real economic effect later, they note that price reaction may differ from expectations, according to commodity specific fundamentals.

However, the bank says that following an extensive analysis of the periods after QE1 and QE2, analyses indicate that gold, silver, oil, and aluminum are likely to move higher with high confidence in mid-term trading.

Prior to Ben Bernanke’s announcement on behalf of the FOMC, Standard Bank wrote that a Fed expansion of its balance sheet by a further $1.3 trillion would lift the fair value estimation of gold to $1,900 in the bank’s analysis.

Physical demand, which had contributed to a drag in the market for much of the first and second quarter, picked up with a fury following the announcement of QE as investors again looked for stability and inherent worth during a time of uncertain monetary policy.

Standard Bank notes that its physical demand for the precious metal remained robust even as prices for gold soared through the $1,700 per troy ounce level.

The report also cited such information as physical demand represented by a Flow Index, or a tracking of physical metal through the market, as well as physical demand in Asia, which traditionally hosts the world’s largest markets for gold.

Overall, the bank projects a relative slow down or consolidation period in the gold market as the markets absorb the very quick price action from Thursday’s trading session.

The spot price of gold remained close to $1,767.79 per troy ounce during early trading on Monday as markets continued to factor in a 2 percent gain from last week, making it the longest stretch of weekly gains for the gold market in over a year.

On the day, the Federal Reserve’s announcement of a pledge to keep interest rates near zero until the middle of 2015 contributed to a 2 percent rise in the gold price for the day.

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