Gold News

Gold recovers May '06 highs as Bernanke says he's done raising rates

Gold recorded its highest price against the US Dollar since May 18th at the PM Fix in London today, up at $668.25 per ounce.

Against the other major currencies, however, gold failed to break new ground, trading around £342 and €510 per ounce at 15:00 GMT.

"[We] have been calling for a weaker US Dollar for some time," said a metals analyst with BNP Paribas. "Mine production is really constrained and with decent investment demand coming in, you could expect gold to push back towards the highs of May last year."

In the spot market, gold broke above $670 as New York opened today. Overnight in Tokyo, the Tocom's benchmark gold future had hit $694 per ounce for Dec. delivery.

Now Ben Bernanke has told a US Senate committee that he sees US inflation slipping back below 2% per year in 2008. That signals no further interest-rate hikes for the Dollar – leading to more easy credit to increase the global money supply.

That can only increase the value of gold as the value of money deteriorates further.

"We feel confident in looking for a push through to $680-$700 over the next 2-3 months," says J.P.Morgan in a note.

It also warns that speculative long positions held by short-term traders could put the current rally at risk. "However, sentiment remains robust, gold remains attractive thematically and technically it has a solid profile."

"We feel far more confident with the current market situation than a year ago when there was a lot of speculative demand," adds Markus Bachmann, manager of the $280 million Craton Capital Precious Metals Fund in Johannesburg.

"This is very long term money."

For more on where gold is headed – and why – click here and read on...

Adrian Ash

Adrian Ash, BullionVault Gold News

Adrian Ash is director of research at BullionVault, the world-leading physical gold, silver and platinum market for private investors online. Formerly head of editorial at London's top publisher of private-investment advice, he was City correspondent for The Daily Reckoning from 2003 to 2008, and he has now been researching and writing daily analysis of precious metals and the wider financial markets for over 20 years. A frequent guest on BBC radio and television, Adrian is regularly quoted by the Financial Times, MarketWatch and many other respected news outlets, and his views from inside the bullion market have been sought by the Economist magazine, CNBC, Bloomberg, Germany's Handelsblatt and FAZ, plus Italy's Il Sole 24 Ore.

See the full archive of Adrian Ash articles on GoldNews.

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