Tags: Gold | Hits | Record | high | Fed | Hints | Future

Gold Hits Record as Fed Hints of Future Easing

Wednesday, 22 Sep 2010 11:36 AM

Gold hit record highs for a fifth consecutive session on Wednesday after the Federal Reserve signaled it stood ready to inject fresh cash into the economy, knocking the dollar and whetting investor appetite for bullion.

Silver also hit a 2-1/2 year peak and edged closer to its highest in 30 years as investors sought cheaper safe-haven assets, which was reflected in the largest one-day inflow of metal into the iShares Silver Trust in 10 months.

Spot gold hit a new record of $1,296.10 an ounce and was bid at $1,293.75 an ounce at 1357 GMT, showing a 0.6 percent gain on the day. U.S. gold futures rose $21.00 an ounce to $1,295.30, having hit a contract high at $1,298.00.

ALERT: Gold at All-Time Highs. Here Is the Best Way to Profit.

The metal is benefiting from concerns over the stability of the financial system and the outlook for fiat currencies. While dollar weakness, a typical driver of gold, is lifting prices, the metal's appeal as a safe store of value has broadened.

"This is not just about the dollar anymore," said Pau Morilla-Giner, senior portfolio manager and head of alternative investments, equities and commodities at London & Capital.

"This is about any currency that is used and generated in a country with massive dislocations, an excess of sovereign debt and a weak banking system. And now, for the first time in history, all major Western currencies have that problem."

The dollar hit its lowest since late April versus the euro on Wednesday after the Fed signaled it may introduce fresh measures to bolster a sluggish U.S. recovery, opening the door to pumping hundreds of billions of new dollars into the economy.

Credit Agricole analyst Robin Bhar said he interpreted the Fed statement as "a conditional easing bias."

"It pushes the door for QE2 (a second round of quantitative easing) wider," he said, adding that this had implications "for a weaker dollar and further unease of what governments will do to weaken their currencies to support flagging economic growth."

Should the Fed resort to a second round of quantitative easing, which involves large-scale purchases of Treasuries to keep interest rates low in exchange for a cash injection into the system, gold's appeal to investors grows as the opportunity cost of holding a non-yield bearing asset declines.

Gold has risen by over 17 percent this year, as investors have sought a relatively safe asset in which to park their cash as major currencies, stocks and bonds have become increasingly volatile.

On the physical market, premiums in Hong Kong and Singapore were little changed despite high prices, with those in Singapore being around 50 to 80 cents, a dealer based in the city said.

Among other precious metals, silver prices broke above $21.00 an ounce to their highest since March 2008 and remained within a hair's breadth of highs not seen since October 1980.

Holdings in the iShares Silver Trust jumped 127.81 tons, the biggest gain in nearly 10 months, to 9,509.55 tons.

Spot silver was last at $21.10, up 0.8 percent on the day, and set for a rise of 9.1 percent in September, its largest monthly gain since November 2009.

"Historically, the silver price has often acted as a geared play on gold prices, so when the gold price is rising, often the silver price outperforms," said Nicholas Brooks, head of research at London's ETF Securities.

"However, when the gold price falls, silver can fall sharply. Silver had also tended to be more sensitive to the business cycle due to its heavy use in industry."

Spot palladium rose nearly 4 percent to $546 an ounce. The price hit a near four-month high of $563 on Sept. 15, while platinum was up 0.9 percent at $1,635.00.

© 2017 Thomson/Reuters. All rights reserved.

 
1Like our page
2Share
StreetTalk
Gold hit record highs for a fifth consecutive session on Wednesday after the Federal Reserve signaled it stood ready to inject fresh cash into the economy, knocking the dollar and whetting investor appetite for bullion. Silver also hit a 2-1/2 year peak and edged closer to...
Gold,Hits,Record,high,Fed,Hints, Future,Easing
624
2010-36-22
Wednesday, 22 Sep 2010 11:36 AM
Newsmax Inc.
 

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

NEWSMAX.COM
MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved