Gold's Fate May Rest With Fed
Author: Rhiannon Hoyle</br></br>The price of gold is back at record levels. But whether it can hit $1,500 in the next few months could depend on whether the U.S. Federal Reserve sticks with an ultraeasy monetary policy that is pushing down the dollar.</br></br>Right now, the Fed appears divided over the outlook for its quantitative easing program, known to the market at QE2 and scheduled to end on June 30, and the possibility of higher interest rates later this year, even if U.S. unemployment remains high.</br></br>Any fresh signs that the Fed remains concerned about the U.S. economy would boost gold, which is seen as an alternative currency and often attracts strong interest in times of economic uncertainty and unusually low or negative interest rates after adjusting for inflation, as is the case now. An even stronger signal for gold could come from an extension of the Fed's program beyond June, which for now, at least, seems likely.</br></br>But any move by the Fed to exit quantitative easing or raise interest rates faster than analysts expect would be detrimental for gold prices, which has come to rely on the U.S.'s super-loose policy. Prices may also come under pressure as investors adjust to life after QE2 and react to any signs that the U.S. economic recovery is gaining traction.