Gold rose, setting a record for the fourth time this week, as a weakening dollar boosted demand for the precious metal as an alternative asset and an inflation hedge. Silver climbed above $40 an ounce to a 31-year high.
Gold rose to $1,476.40 an ounce in New York, the highest ever, after the dollar slid to the lowest level since December 2009 against a basket of six major currencies. Crude oil touched a 30-month high, and the European Central Bank yesterday raised borrowing costs from a record low to fight accelerating prices.
“The Federal Reserve isn’t anywhere near an inflation fight as the ECB,” said Frank Lesh, a trader at FuturePath Trading LLC in Chicago. “Gold’s move is about the weakness in the dollar. Inflation is the buzzword, and it’s the impetus behind the trade.”
Gold futures for June delivery rose $16.60, or 1.1 percent, to $1,475.90 at 4:37 p.m. in after-hours trading on the Comex in New York. The metal settled up $14.80, or 1 percent, to $1,474.10 at 1:39 p.m. in floor trading. For the week, the metal gained 3.2 percent, the most since May. Gold for immediate delivery in London climbed as much as 1.2 percent to a record $1,475.52.
Silver futures for May delivery advanced $1.056, or 2.7 percent, to settle at $40.608. After the close of regular trading, the price touched $40.945, the highest since January 1980, the year futures reached a record $50.35. This week, silver advanced 7.6 percent, the most since February.
The difference between yields on U.S. 10-year notes and Treasury Inflation Protected Securities, a gauge of trader expectations for inflation, widened to as much as 2.64 percentage points, the most since March 2008. The Thomson Reuters/Jefferies CRB Index of 19 commodities rose to the highest since September 2008, led by gains in cotton.
ECB Raises Rates
The Fed has kept the benchmark rate at zero percent to 0.25 percent since December 2008 to stimulate growth. The ECB yesterday raised the main interest rate 25 basis points to 1.25 percent.
“We just don’t hear anything about an inflation fight from the Fed,” Lesh said. “The Fed needs to move back to a neutral policy before they can even think of fighting inflation.”
Gold extended gains after Congress and the President failed to agree on a federal budget. The dollar fell as much as 1 percent against the basket of currencies.
“With the weakness in the dollar, the market is jittery about holding paper currencies and gravitating to the metals,” said Adam Klopfenstein, a senior market strategist at Lind- Waldock in Chicago. “The price of the metals reflects the chaos that will result from a lack of leadership from our Congressional leaders.”
Gold Over Dollars
Dennis Gartman, an economist and the editor of the Suffolk, Virginia-based Gartman Letter, advised clients to sell sterling and buy gold. Earlier this week, Gartman encouraged investors to sell Japanese equities and buy the precious metal.
“With the monetary base skyrocketing, and with the U.S. dollar falling, gold has to move higher,” Gartman said.
Silver held in exchange-traded products rose 27.57 metric tons to 15,423.09 tons yesterday, the highest level since at least February 2010, data compiled by Bloomberg from four providers show.
Investors perceive silver as “a cheap vehicle with characteristics similar to gold as a store of value,” Morgan Stanley said in a report to clients today. The metal will average $31.39 this year, up 20 percent from a previous forecast, the bank said.
Palladium futures for June delivery rose $13.95, or 1.8 percent, to $794.20 an ounce on the New York Mercantile Exchange, after touching a one-month high of $804. Platinum futures for July delivery gained $21.50, or 1.2 percent, to $1,812.10 an ounce on the Nymex. Earlier, the price reached $1,822.10, the highest since March 7.
Palladium rose 2.5 percent this week while platinum gained 2 percent.
Source: Bloomberg By
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