MTECHTIPS'-Gold rises in holiday-thinned trade with central banks in focus

MTECHTIPS'-Gold rises in holiday-thinned trade with central banks in focusGold futures edged higher in holiday-thinned trade during U.S. morning hours on Monday, as the precious metal continued to draw support from hopes policymakers in the U.S., Europe and China will introduce fresh stimulus measures to boost growth. Trade looked likely to remain thin on Monday, with markets in the U.S. closed for the Labor Day holiday.On the Comex division of the New York Mercantile Exchange, gold futures for October delivery traded at USD1,689.55 a troy ounce during U.S. morning trade, adding 0.25%.      Prices were stuck in a tight trading range of USD1,685.35 a troy ounce, the daily low and a session high of USD1,691.85 a troy ounce. Prices rallied to USD1,693.05 a troy ounce on Friday, the highest since March 27.Gold futures were likely to find support at USD1,634.55 a troy ounce, the low from August 22 and near-term resistance at USD1,699.55, the high from March 27. Gold prices surged more than 2% from Friday after Federal Reserve Chairman Ben Bernanke said he was open to more quantitative easing to help boost growth in the U.S. economy. Speaking at the Fed’s annual symposium in Jackson Hole, Wyoming, on Friday, Bernanke said the persistently high rate of unemployment was a “grave concern” and reiterated that the central bank was ready to provide additional policy accommodation as needed to shore up growth.Bernanke also downplayed the risks of quantitative easing and said the program had been effective in providing “meaningful support" to the recovery.Quantitative easing, or major asset purchases by the Fed, keeps interest rates and borrowing costs low, which makes gold more attractive compared with yield- or dividend-bearing assets such as bonds or stocks.    The Fed has already undertaken two rounds of bond-buying, known as quantitative easing, in order to spur lending and growth.Moves in the gold price this year have largely tracked shifting expectations as to whether the U.S. central bank would pump more money into the financial system.Gold gained as much as 15% earlier this year to hit USD1,790 an ounce after the Fed said in January it would keep interest rates near zero until at least late 2014 and indicated that it could introduce a fresh round of asset-purchases.However, prices have lost almost 6% since late February, as the Fed failed to deliver more easing and amid concerns over the euro zone’s deepening debt crisis, which has fueled demand for the precious metal's hedge, the greenback.
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