Gold rises on expectations of more U.S. stimulus

Mon Aug 6, 2012 11:10am EDT
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By Jan Harvey

LONDON (Reuters) - Gold prices rose on Monday, extending the last session's recovery from four days of declines, as investors bet that Friday's better-than-expected jobs data would not be enough to head off another round of monetary easing in the United States.

Despite the improved jobs data, most U.S. economists still expect the Fed to do more to stimulate growth this year, with the majority looking for action as soon as September, the next meeting of the Federal Open Market Committee.

Speculation that the Federal Reserve may have to unleash another round of quantitative easing - essentially, printing money - to boost U.S. growth has firmly underpinned gold prices this year.

Further easing would maintain pressure on long-term interest rates, keeping the opportunity cost of holding gold at rock bottom, as well as weighing on the dollar and boosting inflation expectations in the longer run.

"There is still room for easing if it is required, and there is still a perception that it may be required," Mitsui Precious Metals analyst David Jollie said.

"The question of when that is, with the U.S. elections approaching, makes it difficult to be super bullish on gold, but that doesn't alter the fact that (the perception is there)."

Spot gold was up 0.5 percent at $1,611.29 an ounce at 10:35 a.m. EDT (1435 GMT), while U.S. gold futures for December delivery were up $6.00 an ounce at $1,615.30.

The single currency edged a touch higher on Monday, though investors were still cautious about how effective European policymakers' latest pledges to resolve the bloc's debt crisis would be.   Continued...

Gold bars are displayed at a gold jewellery shop in the northern Indian city of Chandigarh May 8, 2012. REUTERS/Ajay Verma