Gold exchange traded funds rallied 3% on Tuesday amid speculation the Federal Reserve may unveil additional economic stimulus at its September meeting.
The minutes from the August meeting released Tuesday showed that some Fed officials were in favor stepping in to provide more support for shaky financial markets. Options discussed included another round of Treasury bond purchases and shifting the Fed’s portfolio into longer-term bonds.
Instead, in the statement following the August meeting, the Fed pledged to keep short-term interest rates near zero until at least mid-2013.
Gold has been flying the past year while the dollar has been knocked lower on worries the Fed’s policies are stoking inflation and devaluing the greenback, the world’s reserve currency.
Gold ETFs including SPDR Gold Shares (NYSEArca: GLD), ETFs Physical Swiss Gold Shares (NYSEArca: SGOL) and iShares Gold Trust (NYSEArca: IAU) climbed 3% on Tuesday.
Last week, Fed Chairman Ben Bernanke said officials will take an extra day at the September meeting to consider additional support for the economy. [Stock, Gold ETFs Rally After Bernanke]
Gold prices jumped Tuesday morning after Chicago Fed President Charles Evans said the central bank may need to take additional policy steps to help a faltering economy and jobs market.
Evans told CNBC the Fed needs to be more aggressive in its easing policies, adding the central bank’s stimulus to aid the economy hasn’t been responsible for higher commodity prices.
“Strong accommodation needs to be in place for a substantial period of time. If we could sort of make everybody understand that this is going to be in place for a longer period of time, we could knock out some of that restraint that comes about when people talk about premature tightening,” Evans said, according to a CNBC.com report.
“We would have been so much worse if we had not had the accommodation that has been in place, the additional accommodation that came with QE2,” he said.
iShares Gold Trust
Full disclosure: Tom Lydon’s clients own GLD.