Silver as an investment

Gold Holds for Best Quarter Since 2010 / September 26, 2012

Gold edged up on Wednesday as recent stimulus measures by central banks supported bullion’s appeal as a hedge against inflation, although a firm dollar and a shift in investor focus to the euro zone debt crisis capped gains.

Moves by the European Central Bank and the Federal Reserve to ease monetary policy propelled gold to a 6-1/2-month high near $1,790 an ounce last week, but failed to send it above the key $1,800 level as investors looked for fresh catalysts.

Beyond the immediate consolidation, gold is expected to draw more interest as investors seek a hedge against loose monetary policies that create a low interest rate environment and raise the inflation outlook.

Also, the latest news of central banks adding to their gold reserves helped underpin sentiment for bullion.

“There aren’t many places to go for investors,” said a Hong Kong-based trader. “Buying precious metals seems to be one of the places for them to step out of fiat money. Everyone that can be in gold is in gold now.”

Fiat currencies are government-issued and their value is based on the issuer’s guarantee to pay the face amount on demand.

Investment interest in gold has surged over recent weeks, with holdings in physically backed exchange-traded gold funds hitting record highs. Speculative net length in U.S. gold futures and options are at the highest in nearly seven months.

But relatively low volatility and high selling interest in the U.S. gold options market .GVX curbed gold’s ascent, the Hong Kong-based trader said.