gold
The price of gold hit a new record high, driven up by a weaker US dollar and continuing tensions in the Middle East and North Africa.
Spot gold rose as high as $1,513.70 (£917.60) an ounce during early trading in Asia, before retreating.
Investors have been buying the precious metal as a safe haven investment to guard against inflation and recent geopolitical turmoil.
Dealers say gold could even trade as high as $1,520 an ounce.
The dollar could be even weaker, unless there were game-changing comments from Bernanke”
End Quote Ong Yin Ling Phillip Futures
“It’s the dollar play,” said a Singapore-based dealer. “There is more room for prices to go even higher.”
A weak US dollar generally correlates with higher gold prices, as both are seen as safe investments.
On Wednesday, the chairman of the US Federal Reserve, Ben Bernanke, is expected to affirm the commitment of America’s central bank to quantitative easing, a programme to flood money markets with liquidity.
That also tends to drive down the value of the greenback.
Analysts say the prospect of low interest rates in the US is driving investors seeking higher returns towards gold.
“Investors expect the Fed to continue with low rates, which means the dollar could be even weaker, unless there were game-changing comments from Bernanke,” said Ong Yin Ling of Phillip Futures.
Investors continue to react nervously to the uncertainty in the Middle East. An escalation in violence in Yemen and Syria over the weekend has also helped the price of gold strengthen.
Gold is not the only precious metal enjoying a rally, as silver is also on the rise.
Spot silver, sometimes called the poor man’s gold, hit $47.88 an ounce, the highest price since 1980.
Gold and silver continued their winning ways this week. Measured by the closing London PM Fix prices, gold gained $24.50 or 1.75%, while silver rose $1.89 or 5.81%. On an intraday basis, the gold price hit an all time high of $1,440.31 while silver traded to a new 31 year high at $35.55.
Gold’s advance for the week came after solid gains of $19 per ounce in the previous week. Concerns about a weak dollar, skyrocketing oil prices and continuing turmoil in oil producing nations in the Middle East all contributed to reinforce the importance of gold for wealth diversification and as a hedge against a range of adverse economic conditions.
The ongoing surge in oil prices does not reflect an actual shortage in crude production. Inventories remain robust and excess producing capacity seem adequate to replace all of Libya’s roughly 2 million barrels a year of production. Rising oil prices reflect the fear that social unrest will spread to Saudi Arabia, the King of oil producers.
Saudi Arabia is surrounded by countries that are in massive social, religious and economic upheaval. The contagion of violence and revolution has spread throughout the area included Algeria, Libya, Tunisia, Iran, Yemen and Bahrain. If Saudi Arabia follows the path of its neighbors, the price of oil would quickly be on its way to $200 a barrel. Small protests in the Saudi Kingdom this week may be a prelude to much larger upheaval in the months ahead.
Platinum regained some of its luster with a gain of $37 after last week’s loss of $45, while palladium was up $26 following last week’s loss of $62.
After a gain of almost 2% last week, silver continued its sharp upward price movement and gained $1.89 or almost 6% on the week. On a percentage basis, silver’s gain on the week was almost three times the gain seen by gold. Since last summer, silver has vastly outperformed gold, a trend that may continue.
If the gold to silver ratio returns to its long term historical trend of 16, the price of silver would approach $100 per ounce at the current price of gold.
The price of the ProShares Ultra Silver (AGQ) jumped $23 points on the week to close at $204.19 while the popular iShares Silver Trust (SLV) jumped $2 dollars or 6.2%, closely tracking the price of the metal.
