Tags: Morgan | Stanley | QE3 | gold

Morgan Stanley: QE3 a ‘Game Changer’ for Higher Gold Prices

By Dan Weil   |   Tuesday, 18 Sep 2012 02:21 PM

Morgan Stanley commodity strategists say the Federal Reserve’s decision to pursue more quantitative easing (QE) makes them more enthusiastic than ever about gold.

“The Fed’s move was not only supportive of risk assets in general but is likely to undermine the value of the dollar, diminishing a key headwind to higher gold prices evident in the first half of 2012,” the strategists write in a note to clients obtained by Business Insider.

They predict gold will rise to $1,750 an ounce in the fourth quarter and average $1,816 next year.

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Gold recently traded at $1,764 and has surged 12 percent over the last month.

“Recent Fed action is a game changer for gold,” the Morgan Stanley analysts write. “The size and strength of the recent upside move in gold is reflective of decisively changed perceptions of Fed policy going forward … .”

QE3 ratchets the Fed easing program up a level, they say.

And they maintain that the European Central Bank’s recent decision to embark on more QE itself will help boost the precious metal too.

Morgan Stanley isn’t alone in its bullishness for gold. Francisco Blanch, a strategist at Bank of America Merrill Lynch, predicts it will reach $2,400 by the end of 2014, CNBC reports.

He writes in a note to clients that the Fed will probably keep buying mortgage securities until the end of 2014 and purchase more Treasurys following the end of Operation Twist in December.

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