By: Tom Jennemann

New York 25/07/2012 - Gold futures surged higher in the US on Wednesday, supported by a stronger euro and fresh speculation that the US Federal Reserve might launch a thirdround of quantitative easing (QE3) next week.

Gold for August delivery on the Comex division of the New York Mercantile Exchange was last up $23.60 or 1.5 percent at $1,604.40 per ounce. Trade has ranged from $1,577.90 to $1,606.40.

“Disappointing economic data from the US yesterday on top of poor data from Europe and China has many traders believing that monetary stimulus is coming, not only in Europe and China, but also in the US. This is supportive to precious metals as it raises the chances of inflation,” CME Group said in a market commentary.

The Federal Reserve is now seriously considering how and when to launch additional monetary stimulus programmes aimed at jump-starting the stagnant US economy, Wall Street Journal reporter Jon Hilsenrath wrote.

“Central bank officials could take new steps at their meeting next week, July 31 and Aug. 1, though they might wait until their September meeting to accumulate more information on the pace of growth and job gains before deciding whether to act,” he wrote.

This WSJ article emboldened the gold bulls, who place a high level of trust in Hilsenrath's words, Dennis Gartman, an economist and editor of the Gartman Letter, said.

“It is widely accepted and indeed widely understood that Mr. Hilsenrath has an unusually direct pipeline of communication to the highest levels within the Fed. Thus his comments are not considered idle speculation but are instead accepted as near gospel,” Gartman said.

In gold-specific news, physical buying has picked up over the past week, with the usual support coming from the Far East, although Indian buying has also begun to show signs of improving, Standard Bank said in a note.

“We expect Indian buying to gain momentum, although not quite yet,” it said. "Seasonally, Indian demand for physical gold usually picks up in August ahead of the wedding season. Gold futures market participants in India are already anticipating this, as seen in their positioning."

Meanwhile, in wider markets, the euro was last about two-thirds of a cent stronger at 1.2130 against the dollar following comments from European Central Bank council member Ewald Nowotny, who said that there is a strong argument to be made for allowing the European Stability Mechanism (ESM) to apply for a bank licence.

In equities, Germany's DAX and France's CAC-40 were up 0.44 percent and 0.85 percent respectively, while the Dow Jones industrial average was 0.54 percent higher.

As for the industrial commodities, light sweet crude (WTI) futures for September delivery on Nymex were down 9 cents at $88.41 per barrel and the most actively traded Comex copper contract was at $3.38 per pound, up 2.7 cents.

Comex silver for September delivery was up 35.4 cents at $27.165 per ounce. Trade has ranged from $26.780 to $27.410.

Platinum futures for October delivery on Nymex were up $11.80 at $1,398.40 per ounce, while the September palladium contract was $2.50 higher at $564.10.


(Editing by Mark Shaw)