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Gold Prices Hit New Dollar Record, Silver Breaks 30-Year Euro Top, as Soros's "Ultimate Bubble" Rolls On

Gold Prices jumped again for Dollar investors on Thursday, hitting fresh record highs at $1278 an ounce as world stock markets slipped – and government bonds rose – ahead of key US inflation data.

"This is a period of great uncertainty, so nothing is safe," said hedge-fund legend George Soros in an interview with Reuters late Wednesday.

"Gold is the only bull market, apparently; it just made a new high. That may continue [but] I call gold the Ultimate Bubble because it may go higher, but it's certainly not safe and it won't last forever."

Latest US filings show the Soros Fund held some 5.2 million shares of New York's SPDR Gold ETF trust fund on 30th June – a position now worth $644 million.

"We're seeing a bit of consolidation before gold gets some momentum and continues on its upward trend," said one Singapore dealer ahead of this morning's 0.9% rise.

Gold priced in Sterling also jumped as London opened for business, hitting £817 an ounce while the Pound fell on news of shrinking retail sales and industrial activity in the UK.

Eurozone investors wanting to Buy Gold saw the price slip as the single currency rose to a new 5-week high vs. the Dollar.

Now moving through the $1.30 exchange rate nine times since Feb. 2005, however, the Euro has been steadily lower vs. Gold Bullion each time, with the price in Euros rising from €10,400 five years ago to €31,350 per kilo today.

Silver meantime hit €15.85 an ounce on Thursday – its highest level against the Euro since 24 Sept. 1980 when priced at the old Deutschemark's irrevocable exchange rate.

For Dollar investors and traders, Silver's London Fix today came in at $20.92, just 16 cents off its own three-decade high.

"[Japan] will take decisive steps... to overcome deflation," vowed prime minister Naoto Kan today, following Wednesday's purchase of US Dollars by the Bank of Japan.

The US Dollar held above ¥85.60 on Thursday, more than ¥2.5 above this week's 15-year lows.

"If rapid fluctuations in the Yen harm Japanese firms' appetite for investing at home and push them to shift their factories overseas," said Kan – who only this week survived a leadership challenge in Tokyo Diet – "that could further worsen job conditions."

US politician Sander Levin, chair of the House Ways & Means Committee, last night called Japan's forex intervention a "deeply disturbing development.

"China is not the only country with a predatory exchange rate policy."

Despite US allegations of unfair "currency manipulation" by Washington Democrats, the Chinese Yuan "has been allowed to appreciate by 1% in little over a week," notes the latest Commodities Weekly from French bank (and London bullion dealers) Natixis – "a clear acceleration."

Thus Chinese savers holding US currency "have an incentive to diversify," says the bank's research team, adding that while "assets such as gold provide an alternative store of value", the People's Bank still holds only around 1% of its foreign reserves in Gold Bullion.

US Treasury debt accounts for some two-thirds of China's $2.4 trillion reserves. Last week, it hiked its purchases of Japanese Yen, helping spur Tokyo's new Dollar-buying/Yen-weakening program. (Read more about the world's New Currency Wars here...)

"For Chinese households, the situation is equally difficult," Natixis says, citing money-supply growth of 20% per year and negative real interest rates on bank accounts and local bonds. China's stock and real-estate markets "remain under pressure" from Beijing to curb speculative bubbles, and so "as a result, precious metals are inevitably benefiting from this situation of restricted choice."

"Low [US] interest rates are bullish for gold," says Walter de Wet at Standard Bank meantime, adding that the futures market now puts the odds of Federal Reserve rates staying on hold at zero for the next 12 months at 66% today.

"One month ago the futures market assigned a probability of 55% to unchanged rates until Aug. '11. Two months ago this probability was only seen as 25%."

This week's jump to new record highs means "Physical demand has dried up," de Wet says, "However, we expect demand to return should Gold Prices settle in a range for a few days."

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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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