^[1] By Kishori Krishnan Exclusive To Gold Investing News ^[2]

With friends like these, who needs enemies? Silver ^[3] and gold have a new best friend amongst their midst - Ben Bernanke ^[4]. His pronouncement has engineered one of the last decade's most dramatic turnarounds, with gold price leaping nearly 60 bucks and silver joining in the melee with a rise of 100 cents.

The price of physical gold soared, following the Federal Reserve's announcement of its quantitative easing plans. Gold rose 6 per cent in a day and continued upwards, as investors flocked to what is called "a safe haven" by Nicholas Brooks, the head of research and investment strategy at ETF Securities.

"There is the view that this is the beginning of quantitative easing, which is non-conventional policy. If a government starts to move towards quantitative easing, it is negative for the currency and as the UK and Japan are doing it, and Europe are aggressively easing their money supply, people just do not know where to put their money," he said.

He adds that gold is benefiting from a "debasement of the major currencies" as it is viewed as a store of value, because there is a limit on supply, unlike in the case of currencies. Although Brooks says he does not think the gold price will continue to rise in a straight line, he does say it will continue to move higher as the severity of the financial crisis means quantitative easing must continue.

The commodity markets reflected the immediate impact of the Federal Reserve's decision to pump another $1.1 trillion into the money supply. On Wednesday, the gold price went from $890 an ounce to $948 an ounce. By Thursday afternoon, it had risen to $960 an ounce. The surge in the precious metal was a result of an announcement by US Federal reserve that it was determined to buy as much as $300 billion of treasuries, up to $750 billion of bonds backed by government-controlled mortgage companies and $100 billion in debt from other government agencies to loosen credit. The announcement was seen as a part of quantitative easing measures by the US policymakers.

Tom Gidley-Kitchin, analyst at Charles Stanley Stockbrokers, said: "The Fed announcement caused a weaker dollar which is generally positive for gold, and there was also a perception that the US was happy to see the dollar lower." Gidley-Kitchin said this sentiment - also seen in other countries - was fuelling a drive into gold as investors hunted for areas which offered better short term prospects.

Forecast

Citigroup Inc ^[5](C:NYSE). raised its gold forecast by 3.8 per cent for this year on rising investment demand for a haven amid economic and financial uncertainty and on concerns government stimulus packages may spur inflation. The price may average $856 an ounce, Citibank said in a report, up from a January estimate of $825 an ounce. The price may average $925 in 2010, up 2.8 per cent from the previous estimate of $900 an ounce.

Emphasizing that it is important to consider the technical outlook for gold, Citigroup predicted that gold will test the $935 mark in the next month "and the success and failure of that move should determine whether another attempt at $1,000 proceeds."

"In the current environment of economic meltdown and systemic threats to financial markets safe haven demand will continue and gold prices will remain elevated, potentially moving much higher," Citigroup forecast.

Analysts including those at UBS AG ^[6]and Morgan Stanley ^[7]have raised their target for gold as investors seek to protect their wealth amid slumping economic growth. Governments and central banks are spending trillions of dollars in response to the worst financial crisis since the Great Depression.

Investors are concerned about a systemic collapse of global financial markets and mechanisms. Investors may also be concerned about an ultimate reversal of current deflation, and a resurgence of inflation is the ultimate consequence of massive monetary stimulation. Some investors buy gold as a hedge against inflation.

In London, Barclays Capital ^[8](BARC.L) lifted its gold price forecast for 2009 to $940 an ounce from $920, citing the prospect of a weaker dollar and fears about inflation, Reuters reported. "Plans for further quantitative easing by the United States has seen the dollar nosedive," the bank said in a note. "In that environment, gold will shine, and we have revised our price forecast higher."

The bank said it expects prices to rise to $905 an ounce in the second quarter from $872 in the first, to $950 in the third quarter and to $980 in the last three months of the year. The bank also raised its silver price forecast for the full year to $13.20 an ounce from $11.80, and raised its platinum ^[9] price view to $1,090 an ounce from $1,020. It raised its palladium ^[10] forecast to $213 an ounce from $210.

Meanwhile, SPDR Gold Trust ^[11], the biggest exchange-traded fund backed by bullion, overtook Switzerland's central bank holdings March 12 as the world's sixth-largest stockpile. The fund held 1,069.05 metric tons, according to the company's web site, up 61 per cent from a year ago.

Stock post

Toronto's main stock index closed higher for an eighth straight session on Thursday as the U.S. Federal Reserve's plan to fight the recession boosted commodity prices and buoyed the resource-heavy index. Energy and gold-mining companies headlined the rally, which was largely a continuation from Wednesday's surge.

Goldcorp ^[12] (G:TO) shares rose 5.78 per cent on Thursday to C$41.89, while Barrick Gold Corp ^[13](ABX.TO) ended up 3.79 per cent at C$41.36.

Unlike November 2008′s big fall, the skid early this month was followed by a streak of gains that some experts say could hold up in the face of further bouts of selling. "I think it's too early to tell on that, but it's certainly better to have these stocks up than down," said John Kinsey, portfolio manager at Caldwell Securities Ltd. "You've got to start somewhere, so hopefully we've maybe put in a bottom and were working at putting in some kind of a base."