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Gold Climbs to Record on Wealth-Shield Demand; Silver Advances

Thursday, 30 Sep 2010 08:38 AM

Gold rose to a record in New York and London as investors sought protection from financial turmoil in Europe and a weakening dollar. Silver climbed to a 30-year high and palladium reached a 2 1/2-year high.

Ireland’s central bank said Anglo Irish Bank Corp. and Allied Irish Banks Plc may need as much as 14.4 billion euros ($19.6 billion) in extra capital. Moody’s Investors Service today downgraded Spain. The dollar dropped to a five-month low against the euro and has slumped this month on bets the Federal Reserve will ease monetary policy further to bolster the slowing U.S. economy.

“The market is still very concerned about developments in the U.S. and Europe,” said Bernard Sin, head of currency and metal trading at bullion refiner MKS Finance SA in Geneva. “People are thinking that gold is one of the only assets to protect their wealth.”

Gold futures for December delivery added as much $5.90, or 0.5 percent, to $1,316.20 an ounce and traded at $1,313.90 at 8:01 a.m. on the Comex in New York. Prices are up 5.5 percent this quarter. Bullion for immediate delivery in London was 0.2 percent higher at $1,312.75 an ounce after reaching $1,315.03.

Bullion rose to a record $1,311 an ounce in the morning “fixing” in London, used by some mining companies to sell output, from $1,307.50 at yesterday’s afternoon fixing. Spot prices are heading for an eighth quarterly gain, the longest winning streak since 1979. The metal, which usually moves inversely to the dollar, may reach $1,350 by the end of the year, Sin said.

Money-Printing Concern

Gold, up 20 percent this year, is heading for its 10th consecutive annual gain, the longest winning streak since at least 1920 in London. Bullion has outperformed global equities, Treasuries and most industrial metals, prompting record investment 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.

The Fed has left its benchmark interest-rate target at a record low and pledged to take more steps to spur growth if necessary. Fed policy makers next meet on Nov. 2-Nov. 3.

“The worry is that any additional measures by the Fed will result in increased printing of money and thus monetization of some debt,” Tom Pawlicki, an analyst at MF Global Ltd. in Chicago, said in a report. “A decision to add to quantitative easing will boost gold and silver” on concern that the dollar will weaken, he said.

Gold assets in ETPs gained 0.67 metric ton to 2,096.42 tons yesterday, according to data compiled by Bloomberg from 10 providers. Holdings are up 17 percent this year and equal the combined official reserves of China and Switzerland, based on figures from the World Gold Council.

Iran Currencies Offer

Iran’s central bank will offer buyers unlimited amounts of foreign currencies and gold starting today, as the prices of the currencies and metal rise, the state-run Mehr news agency reported yesterday, citing Vice President Mohammad Reza Rahimi.

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 1.8 percent from 2.22 percent six months ago.

Silver for December delivery in New York climbed as much as 0.8 percent to $22.125, the highest price since October 1980, and was last at $22.02 an ounce. Prices are up 31 percent this year and 18 percent this quarter, heading for the best quarterly gain since the three-months ended Sept. 30 last year.

‘Very Bullish’

The metal, used to create the first telegraph messages, is heading for a seventh quarterly advance in London. That’s the best streak since 1974. Prices reached an all-time high of $50.35 an ounce in New York in 1980, a year after the Hunt brothers tried to corner the market. The ratio of gold to silver dropped to as low as 59.5124, the lowest level since October.

Silver futures are set for the second-highest quarterly close since at least 1975, which is “very bullish technically,” said Mark O’Byrne, executive director of brokerage GoldCore Ltd. in Dublin. “A lot of technically minded traders will look at that, and now look at the next psychological level of $25.”

Holdings of silver in ETPs were 13,735.64 tons yesterday, the most in at least seven months, data compiled by Bloomberg from four providers show.

“Investors are clearly shifting their focus to precious metals of a hybrid character,” Commerzbank AG analysts including Eugen Weinberg said today in a report. “These firstly have the status of a safe haven, but also show some correlation with the economic cycle. Silver, platinum and also palladium should therefore remain well supported.”

Platinum for January climbed as much as 0.6 percent to $1,666 an ounce, the highest level since May 19, and was last at $1,663. Palladium for December added as much as 1.3 percent to $574.70, the highest level since March 4, 2008. Prices were last at $569.80.

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Gold rose to a record in New York and London as investors sought protection from financial turmoil in Europe and a weakening dollar. Silver climbed to a 30-year high and palladium reached a 2 1/2-year high.Ireland s central bank said Anglo Irish Bank Corp. and Allied Irish...
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Thursday, 30 Sep 2010 08:38 AM
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