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Will Central Banks Stimulate Economy? Gold Bulls Hope So

August 8, 2012 at 23:53 by Vladimir Vyun

Gold climbed today, following yesterday’s decline. The drop followed the three consecutive sessions of gains. Investors hope that central banks of developed nations would refer to stimulus for supporting economic growth and such hopes provide the precious metal strength.

The Bank of Japan has started the two-day policy meeting today and there is a possibility that the bank would ease its monetary policy in order to weaken the strong Japanese yen, which is hurting the nation’s economy. European Central Bank President Mario Draghi promised to support the euro and traders expect some form of stimulus for the ECB. Talks about a third round of quantitative easing from the Federal Reserve have appeared long time ago, but QE3 is still possible. The Bank of England was an exception as its Governor Mervyn King signaled that he is not going to ease the monetary policy. Yet there are other measures of stimulating an economy and the BoE still may introduce some form of QE.

The speculations about stimulating measures from central banks are bullish for gold. Decreasing interest rates and other forms of monetary easing usually weaken currencies. That may drive investors to precious metals in search of a safe haven.

Gold rallied from $1,610.04 to $1,612.43 per ounce on COMEX today, following the drop to $1,603.41.

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