Gold flat near 6-1/2-month high, stimulus supports

Wed Sep 19, 2012 12:03pm EDT
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By Frank Tang

NEW YORK (Reuters) - Gold traded flat on Wednesday, hovering near a 6-1/2 month high hit in early trade, buoyed by monetary stimulus from central banks around the world despite pressure from tumbling crude oil prices.

Turnover in U.S. gold futures was higher than usual after the Bank of Japan became the latest major central bank to ease monetary policy with a new round of asset buying. <ID:L4E8KJ05L>

Last week, gold posted its fourth straight weekly rise after the Federal Reserve unveiled a third round of bond-buying, called quantitative easing or QE3. Earlier, the European Central Bank pledged to launch its own new bond-buying program.

"While we expect QE3 to be supportive of gold prices, much will depend on how QE3 plays out in the fixed income markets and how it impact the euro-dollar," said James Steel, metals analyst at HSBC.

Steel said he was impressed that gold's price stayed high despite slumping crude oil and recent weakness in the euro and platinum. Some have warned that gold may not rise as much during QE3 as it did during two earlier rounds of quantitative easing. (Past QE market reaction:

Spot gold was down 77 cents at $1,772.46 an ounce by 11:27 a.m. EDT (1527 GMT), after hitting a 6-1/2 month high of $1,779.10, around $10 below the 2012 high of $1,790.30.

BNP Paribas analyst Anne-Laure Tremblay said monetary easing by central banks should continue until economic growth improves substantially. She said subdued inflation in developed countries gives central banks more latitude for economic stimulus.

Last Thursday, the Fed said it would buy $40 billion of mortgage-backed debt each month until the U.S. jobs outlook improved substantially, as long as inflation remained contained.   Continued...

Gold Bullion from the American Precious Metals Exchange (APMEX) is seen in New York, September 15, 2011. REUTERS/Mike Segar