JP Morgan Set Medium Term Gold Target of $1,700

Los Angeles – The Gold price gained 1.42 percent to $1,428.00 an ounce for the week while the price of silver jumped by 6.60 percent to $35.51 an ounce and the Gold/Silver ratio fell to a new 13 year low of 40.21, as silver outperformed gold. The week began with the Fed Bank of New York President William Dudley saying on Monday that even though the economic outlook may appear “considerably brighter” the central bank would still not withdraw monetary stimulus.
“We provided additional monetary policy stimulus via the asset purchase program in order to help ensure the recovery did regain momentum,” Dudley said in his remarks on Monday. “A stronger recovery with more rapid progress toward our dual mandate objectives is what we have been seeking. This is welcome and not a reason to reverse course.” These remarks started investors to contemplate the possibility of a third round of quantitative easing (QE3) on the horizon.
With crude oil prices remaining above $100 per barrel for most of the week due to the continued fighting in Libya, Fed Chairman Ben Bernanke mentioned in his monetary policy testimony before Congress that short term spikes in oil prices would probably not lead to a permanent increase in inflation, he did acknowledge however that “sustained rises in the prices of oil or other commodities would represent a threat both to economic growth and to overall price stability.” Since sharp rises in the price of oil have historically preceded recessions in the U.S, lingering unrest in the Middle East and North Africa could have devastating effects on the economic recovery in the U.S.
Venezuelan President Hugo Chavez attempted last week to broker a peace deal between Colonel Muammar Gaddafi of Libya and anti-government rebels. President Chavez had proposed negotiating with an international committee including participants from Latin America, Europe and the Middle East, but the rebels refused to negotiate and the proposal quickly unraveled. The fighting in Libya soon turned increasingly more violent and cities like Benghazi and several key oilfields in the eastern region of the country reportedly fell to the control of anti-Gaddafi forces. The fighting continues with no real consensus as to who is winning and who is losing in the struggle for Libya.
J.P. Morgan’s Murray Morrison, said in a note written to clients on Wednesday, “Gold rallied by nearly $20 yesterday, breaking above three-month old resistance to trade at a new all-time high. The metal remains in its well-supported uptrend and resistance at $1415 has become near-term support. As long as Gold holds above $1415, we expect medium-term gains to a target of between $1650 and $1700.” This statement has investors buying the dips and Gold bullion prices beginning once again to set higher highs and higher lows.

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