Gold Futures Rise to 16-Week High on Fed Stimulus Bets

Gold rose to a 16-week high on signs that Federal Reserve policy makers may expand monetary stimulus to bolster the U.S. economy, boosting demand for the metal as an inflation hedge.

“Many members judged that additional monetary accommodation would likely be warranted fairly soon unless incoming information pointed to a substantial and sustainable strengthening in the pace of the economic recovery,” according to the record of the Federal Open Market Committee’s July 31-Aug. 1 gathering released today.

“Gold is surging on renewed expectations of inflation rising after easing,” Michael Gayed, the chief investment strategist at New York-based Pension Partners LLC, which advises on more than $150 million in assets, said in a telephone interview.

After the Fed announcement at 2 p.m. New York time, gold futures for December delivery reached $1,655.90 an ounce on the Comex, the highest for a most-active contract since May 2. The price gained 0.7 percent to $1,654.70 an ounce in electronic trading at 2:54 p.m.

Earlier, the metal settled 0.1 percent lower at $1,640.50.

Gold surged 70 percent from the end of December 2008 to June 2011 as the Fed kept borrowing costs at a record low and bought $2.3 trillion of debt in two rounds of so-called quantitative easing.

Fed Chairman Ben S. Bernanke may address monetary options at a conference in Jackson Hole, Wyoming, at the end of August.

In 2010 at the Kansas City Fed’s annual monetary symposium in Jackson Hole, Bernanke foreshadowed a $600 billion bond-purchase program.