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(Bloomberg) – Fed’s QE3 Signals Gold Rise to $2,000 by March: Chart of the Day
Gold may surge to a record $2,000 an ounce in the next six months as the Federal Reserve’s third attempt at economic stimulus stokes concern that inflation will accelerate, according to TD Securities Inc.
The chart of the day shows that gold prices have moved almost in tandem with inflation expectations, which jumped to the highest in 16 months after the Fed announced a third round of bond buying. Investors may increase purchases of the precious metal to protect against rising consumer prices, said Bart Melek, the Toronto-based head of commodity strategy at TD Securities.
Gold soared 70% from the end of December 2008 to June 2011 as the Fed kept borrowing costs at a record low and bought $2.3 trillion of bonds in two rounds of so-called quantitative easing.
On Sept. 13, the central bank said it will expand holdings of long-term securities with open-ended purchases of $40 billion of mortgage debt a month and keep the benchmark interest rate near zero “at least through mid-2015.”
“We are running the risk of inflation because of this highly accommodative monetary policy,” said Melek, the third- most accurate price forecaster for precious metals tracked by Bloomberg during the eight quarters through June 30. “The concern is that even as velocity in the banking system picks up, the Fed may not drain away liquidity fast enough.”