Gold rose back towards yesterday's 3-week peaks in London on Wednesday, pushing higher against all major currencies as world stock markets slipped.
Crude oil rallied and US government bonds also ticked higher, while wheat prices hit near 3-year highs following news of a winter drought in China, the world's top producer.
Silver Prices rose again, hitting new 5-week highs above $30.50 per ounce – less than 2.5% below Jan.'s 30-year top.
"Gold appears to be pulled higher on stronger Silver Prices," says Russell Browne in his latest technical analysis for Scotia Mocatta clients.
Silver "exploded higher" on Tuesday, he says Browne, forcing the Gold/Silver Ratio "below major support at 46.00."
Falling as the Silver Price rises faster than gold, the Gold/Silver Ratio "sees next support at the 2006 low of 44.00 followed by 1998 low [at] 39.00," says Browne.
The Shanghai stock market meantime fell 0.9% on Wednesday, its first day back after the week-long Chinese New Year shutdown – and one day after the People's Bank raised its interest rates for the third time in 3 months.
Far Eastern gold and Silver Bullion trading remained "lacklustre" according to Hong Kong dealers, with volumes "suppressed...despite expectations of an explosive session."
"[Gold Buying] will most likely only pick up from Monday" next week, says Standard Bank in a note, "as many extend their break.
"Initially, the threat of [China] draining global liquidity pushed [gold and silver] prices down sharply. Shortly after though, speculation that the interest-rate hike might fuel concerns over rising global inflation saw precious metals reverse direction, posting some remarkable gains."
"The threat of inflation and an accommodative stance from the Fed are keeping expectations for real rates under control, which continues to lend support to gold," says Japanese conglomerate Mitsui in its daily note.
US Treasury bond yields have risen sharply in the last fortnight, but "Fed rate hikes are 'always a day away' for the market," says the FT's Alphaville blog, citing analysis from Ethan Harris at Bank of America Merrill Lynch.
Harris' chart shows the futures market repeatedly pricing in – and then failing to get – higher Federal Reserve interest rates since they were cut to zero at the start of 2009.
The Fitch rating agency's latest quarterly survey of European bond-fund managers says 55% think there is a "high risk of inflation" in 2011 – more than twice the percentage at end-2010, and up from only 1-in-8 last May.
After the European Central Bank failed to use the words "vigilant on inflation" at its monthly press conference last week, the Bank of England meets today to announce its latest policy rate on Thursday.
Money markets see little chance of a change, with a rise of 0.25% priced in for May by futures traders.
New data released Wednesday showed the UK's trade deficit doubling to £4.8 billion in Dec. from the same month in 2009, with the deficit in physical goods widening from £7.2bn to £9.2bn.
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