Gold News

Gold ends Thurs up 1.5% after hitting 27-year high on Mid-East Dollar fears

From Chris Mullen at GoldSeek.com...

Spot Gold Prices rose as high as $738.10 on Thursday and marked their highest price since climbing to $850 in Jan. 1980.

After trading slightly higher in Asia and finding about 1% gains in London, the Gold Market rose even further to find over 2% gains by late morning in New York before it fell back off into the close, but it still ended with a gain of 1.53%.

Silver rose near $13.50 by late morning in New York before it also fell back off in afternoon trade, but it still ended with a notable gain of 2.94%.

The Euro Price of Gold rose over €522, platinum gained $16 to $1323, palladium gained $2 to $334, and copper remained at about $3.58.

Gold and silver equities rose throughout most of trade and closed near their highs with about 4% gains.

In the economy, initial US jobless claims showed a surprise dip, but so too did the monthly Leading Indicators report, down 0.6%. Both Ben Bernanke and Hank Paulson testified before the US Congress about the housing crisis and said they were open to easing loan constraints on government-sponsored enterprises like Fannie Mae and Freddie Mac to help stabilize the US mortgage market.

Crude oil leapt to a new record high of $84.10 on the view that the Fed’s rate cut will help keep demand strong while 28% of production in the Gulf of Mexico was shut down due to a developing storm in the Atlantic that is threatening facilities. The October contract expired today and tomorrow the front month contract will be November which closed up $0.93 to $81.78

The US Dollar index plunged to a new 15-year low, as the greenback dropped to a new all-time low versus the Euro and also fell to parity with the Canadian Dollar for the first time in 31 years.

In addition, the USD index closed just 0.42 points away from breaking through the previous all-time low of 78.19 set in 1992. Lower US interest rates from the Fed continue to add selling pressure to the Dollar, while a failure to lower rates in Saudi Arabia suggested the oil kingdom may be gearing up to cut its Dollar currency peg, threatening a stampede out of the Dollar across the Middle East.

US bond prices fell and Treasury yields rose on concerns over inflation. The Dow, Nasdaq, and S&P fell on mostly poor earnings and worries over those record high oil and a near record low dollar.

"The rate cut by the Fed this week was confirmation of their policy of flooding the system with cheap money," says Peter Spina at GoldForecaster.com.

"Therefore the US Dollar has continued its slide and gold is reacting to this. Gold has technically broken through major resistance levels and is attracting new investment flows. Gold is eyeing the all-time record highs from 1980’s which is around $850/ounce. Yet this is using 1980 dollars.

"Adjusting for inflation, the Gold Price has a ways to go to reach its inflation-adjusted highs. We would have to see gold surpass $2,000 accounting for 27 years of dollar devaluation. That is a level becoming more likely as the current situation evolves, but likely years away."

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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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