Tags: Gold Again Hits Record as Dollar Weakens on Fears of ECB Rate Hike

Gold Again Hits Record as Dollar Weakens on Fears of ECB Rate Hike

Wednesday, 06 Apr 2011 01:30 PM

Gold rose to an all-time high for a second straight day on Wednesday, as the U.S. dollar weakened ahead of an expected interest rate hike from the European Central Bank (ECB).

Silver also surged to a 31-year high for a third consecutive day as holdings of the world's largest silver ETF hit a record. Inflation fears have boosted precious metals, as crude oil and corn prices hovered near new peaks.

On the silver options front, heavy trading of bullish strategies such as call spreads buying and puts selling indicate the metal is building momentum for another upward move.

"It is unquestionable that the demand for precious metals derives from the devaluation of the leading currencies — the dollar, the pound and the euro," said Angelos Damaskos, a fund manager at Sector Investment Managers.

Spot gold hit a record $1,461.91 an ounce and was later up 0.3 percent at $1,455.34 an ounce by 12:33 p.m. EDT. U.S. gold futures for June delivery rose 0.3 percent to $1,456.90.

Gold remains far below its all-time inflation-adjusted high, estimated at almost $2,500 an ounce.

Gold drew support as the euro climbed against the dollar to its highest in more than a year. The ECB is widely expected to raise its benchmark rate 25 basis points on Thursday. Higher interest rates usually weigh on gold, but the metal could gain if rate differentials weaken the U.S. dollar.

The traditional inverse correlation between gold and the dollar appeared to be strengthening this week as gold rose to successive records, but the link between the two could remain erratic in the near term.

Strong investment demand drove silver up more than 1 percent to a 31-year high of $39.75 — its highest level since January 1980, when the Hunt Brothers corned the market. It eased off that session high to trade at $39.35 an ounce, up 0.3 percent.

"Either way, you are going to see a significant move from here. Even though we were up this much, I think you are going to see an even bigger move," said COMEX gold and silver options floor trader Dominick Cognata.

Holdings of silver in the iShares Silver Trust ETF are at a record 11,162.45 tonnes (metric tons), up more than 240 tonnes so far this year.

Reflecting the pick-up in investor demand for gold was the first inflow of metal since March 16 into the SPDR Gold Trust.

Investors remained focused on Thursday's three central bank policy meetings. The ECB is seen as almost certain to raise rates, while the Bank of Japan and the Bank of England are expected to hold rates steady.

For platinum group metals, spot platinum rose 0.8 percent to $1,800.74 an ounce, while palladium inched up 14 cents to $786.52.

© 2017 Thomson/Reuters. All rights reserved.

   
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Gold rose to an all-time high for a second straight day on Wednesday, as the U.S. dollar weakened ahead of an expected interest rate hike from the European Central Bank (ECB). Silver also surged to a 31-year high for a third consecutive day as holdings of the world's...
Gold Again Hits Record as Dollar Weakens on Fears of ECB Rate Hike
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2011-30-06
Wednesday, 06 Apr 2011 01:30 PM
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