Tags: Gold | Climbs | Record | Dollar | Weakens | Fed

Gold Climbs to Record as Dollar Weakens Following Fed Statement

Wednesday, 22 Sep 2010 07:01 AM

Gold climbed to a record in London and New York after the Federal Reserve said it was willing to ease monetary policy further to boost the U.S. economy, triggering a slump in the dollar.

The dollar declined as much as 0.9 percent against the euro today, after the Federal Open Market Committee said yesterday in its statement that it’s “prepared to provide additional accommodation if needed to support the economic recovery” Silver reached the highest price since March 2008 and platinum hit a four-month high.

“If and when this ‘additional accommodation’ discussed by the FOMC occurs, the reasoning will be more about a stealth devaluation of currency than a boost for consumer spending,” Brad Yim, a New York-based analyst at Castlestone Management Ltd., said by e-mail. The Fed wants a lower dollar to stimulate exports, he said. “A move like this should provide further support for gold in the near-to-medium term.”

Bullion for immediate-delivery rose $4.75, or 0.4 percent, to $1,291.90 an ounce in London at 10:31 a.m., after earlier today rising to a record $1,295. Gold for December delivery was 1.5 percent higher at $1,293.20 an ounce on the Comex in New York, after touching an all-time high $1,296.50.

The dollar fell to the lowest against the euro in almost five months before Portugal sells bonds today after investors bought the maximum amounts offered at Spanish and Irish debt sales yesterday.

Gold, up 18 percent this year, is heading for its 10th consecutive annual gain, the longest winning streak since at least 1920. Bullion has outperformed global equities, Treasuries and most industrial metals, prompting record investments in gold-backed exchange-traded products. The metal rallied as central banks and governments maintained low borrowing costs and spent trillions of dollars to stimulate their economies.

Gold and Inflation

Global holdings of gold by ETPs gained 1.01 metric tons to a record 2,089.5 tons yesterday, according to Bloomberg data from 10 providers. Holdings are up 16 percent this year.

Prices have gained this year even as U.S. inflation slowed. Bullion is traditionally bought as a hedge against rising consumer prices. Inflation expectations, based on the 10-year U.S. Treasury breakeven rate, have fallen to 1.82 percent from 2.19 percent six months ago.

The FOMC said in a statement after its meeting yesterday in Washington that “inflation is likely to remain subdued for some time before rising to levels the committee considers consistent with its mandate.”

Silver Surges

“I don’t think many people are actively trading gold based on a view that inflation is likely to accelerate in the near- term,” said Tom Kendall, an analyst at Credit Suisse Group AG in London. “Certainly some people are concerned about the longer-term impact of current monetary policy on inflation.”

Silver for immediate delivery in London gained 0.6 percent to $21.0875 an ounce, after earlier today reaching $21.1263, the highest price since March 17, 2008. The metal is up 25 percent this year.

Platinum rose 0.5 percent to $1,631.97 an ounce, after reaching $1,634.05, the highest level since May 19.

“Both metals look also well supported and silver remains in its uptrend,” said Alexander Zumpfe, a precious-metals trader at Hanau, Germany-based Heraeus Metallhandels GmbH. “However, we think that despite its own technical bullish picture the latest move was currency-driven with the dollar losing ground after yesterday’s Fed comments.”

Palladium gained 1 percent to $540.50 an ounce.

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Gold climbed to a record in London and New York after the Federal Reserve said it was willing to ease monetary policy further to boost the U.S. economy, triggering a slump in the dollar.The dollar declined as much as 0.9 percent against the euro today, after the Federal...
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2010-01-22
Wednesday, 22 Sep 2010 07:01 AM
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