New Record for Gold!(again)

Gold hits record as Fed signal sinks dollar

Gold surged to a record high at $1,367.65 an ounce on Wednesday and silver to a 30-year peak after the Federal Reserve signalled the U.S. economy may need extra stimulus, which hit the dollar.
 

Gold surged to a record high at $1,367.65 an ounce on Wednesday and silver to a 30-year peak after the Federal Reserve signalled the U.S. economy may need extra stimulus, which hit the dollar.

Photograph by: World Gold Trust Services, Reuters

LONDON — Gold surged to a record high at $1,367.65 an ounce on Wednesday and silver to a 30-year peak after the Federal Reserve signalled the U.S. economy may need extra stimulus, which hit the dollar.

Gold prices have rallied nearly 25 percent so far this year as investors turned to the metal as a haven from the effects of an increasingly loose monetary policy.

Spot gold XAU hit a peak of $1,367.65 an ounce and was bid at $1,366.75 an ounce at 1417 GMT, against $1,349.60 late on Tuesday. U.S. gold futures for December delivery GCZ0 rose $21.50 to $1,368.20, having earlier touched a record $1,368.90.

Silver XAG hit a peak at $23.69, its strongest level since 1980, and was bid at $23.63 an ounce against $23.28.

“Because we are in a world of quantitative easing in the developed economies, and as QE is almost synonymous with competitive devaluation… gold and the precious metals (are) taking on the function of an alternative currency,” said Ashok Shah, chief investment officer at London and Capital.

“As we go into the next 1-4 quarters, the role of precious metals as alternative currency will become much more paramount,” he said. “The role of gold as an inflation hedge is not important now, but it may become important in the next cycle, when the time to reverse quantitative easing comes.”

The dollar remained the main short-term driver of gold, with the currency coming under broad selling pressure as speculation grew that the Fed will introduce further monetary easing after the release of minutes from its last policy meeting. 1/8FRX/ 3/8

Results from JPMorgan Chase JPM.N, the second-largest U.S. bank by assets, helped the dollar cut some of its losses in early afternoon trade and nudged gold down from session highs, but it quickly bounced back.

Gold’s inverse relation to the U.S. dollar was at its most pronounced in six months on a 30-day rolling basis in early European trade.

DEMAND UP

Physical demand remains strong, and scrap selling is scarce, as market players bet on a further rally in prices, according to Asian dealers.

Edel Tully, precious metals strategist at UBS, said the bank’s physical sales to India were above the year-to-date average ahead of Diwali, a key period for Indian gold buying.

“Separately, scrap supply is certainly visible at the refineries, but we don’t believe it is at levels which can on its own curtail gold rallies,” she said in a note.

Meanwhile, spot palladium XPD rose as much as 2.5 percent to a one-week high of $594.50 an ounce, aided by the weaker dollar and evidence that investors are continuing to buy into one of the top performing commodities of 2010.

Outstanding shares in ETF Securities’ U.S.-listed palladium exchange-traded fund, the world’s largest palladium ETF, staged their largest one-day rise in six months on Tuesday, indicating strong inflows of metal.

With palladium up 45 percent so far this year and close to its highest in over nine years, the platinum-palladium ratio, or the number of ounces of palladium used to buy an ounce of platinum, fell to 2.87, its lowest in more than six years.

 

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