Gold prices fell almost 3% on Tuesday as news from the Treasury Secretary. Timothy Geithner made a promise Monday night that the governement will not devalue its currency and will preserve confidence in the U.S currency. On this news gold futures for December plummeted 2.6% or approx $35 an ounce on the the New York Mercantile Exchange Comex division. This is the biggest gold drop in months. In addition other metal retreated with silver tracking 81 cents lower, a 3.3% drop. Silver has outperformed gold in recent weeks. The dollar continued to level off from its eighth month low.
Price of Gold Declines
The price of gold declined today on news that the precious metal has been over traded as an alternative to a weakened U.S dollar. Gold had reached a high of $1387 on Thursday during exciting morning trading.
Investors are eagerly waiting for Ben Bernanke the Federal Reserve Chairman to deliver his address on future monetary policy goals today in Boston. If the dollar goes lower on troubling news the price of gold could be supported. Afshin Nabavi the vice president at MKS Finance SA recently said, “The dollar for the time being may go lower” and that will support gold.”
Gold has gained 26 percent this year and is going into the tenth annual year of gains. This is the longest time of increase for gold since the 1920’s. As world economies continue to spend trillions of dollars to dig their way out of weakened economies and stimulate growth metals continue to rally. Speculation that the FED will further increase spending is causing the outlook of the dollar to diminish.
A recent survey by Bloomberg found that 15 out f 19 traders, analysts, and investors, or 79 percent believe gold will continue to gain next week. Three predicted lower gold prices and one was believed gold prices would remain the same.
Update# Federal Reserve Chairman Ben Bernanke said today that there was a case for further monetary easing given low inflation and high unemployment, but he offered no details on the central bank’s next step. At the Boston conference today Bernanke remarked, “There would appear — all else being equal — to be a case for further action.” The Fed will it’s next policy setting meeting in November.
Gold Price Record Set
A brand new record was set for the price of gold on Thursday morning with gold trading reaching $1,388 per ounce. This milestone coincides with the dollar hitting a 15 year low versus the Japanese yen. Currently gold prices are rising in relation to all currencies. In the last 60 days alone gold prices have seen a 12% rally in U.S dollars.
Gold continues to be thought of as a safe-haven asset against a continually weakening U.S. dollar. Bullish gold investors are looking at $1400 an ounce as the next resistence area as the dollar continues to remain weak.
Further presure on the dollar is likely to remain as long as the Federal Reserve continues hinting that they will announce additional stimulus spending and monetary easing in November during its next policy setting meeting. Gold prices have risen over 5% in October and many gold speculators are saying FED policy could drive the price above $1420 by next month.
Suki Cooper an analyst for Barclays Capital recently added, “For now, short-term investor interest remains supportive for gold prices testing new highs.”
Gold Price Hits New Record
The gold price hit an new record today of $1370.77 an ounce and silver has reached a thirty year peak due in large part to the U.S Federal Reserve Signalling a second stimulus was needed. This year alone gold has improved and rallied 25 percent against a weakened dollar. Results from JPMorgan Chase JPM.N, the second-largest U.S. bank by assets, helped the dollar cut some of its losses in early afternoon trade and nudged gold down from session highs, but it quickly bounced back.
Gold’s inverse relation to the U.S. dollar was at its most pronounced in six months on a 30-day rolling basis in early European trade. Extremely loose monetary policy has contributed significantly to a move away from paper currencies to gold and other precious metals.
Chief investment officer at London and Capital, Ashok Shah recently said, “Gold and the precious metals are taking on the function of an alternative currency.” He also noted, “As we go into the next 1-4 quarters, the role of precious metals as alternative currency will become much more paramount.” The dollar is under extreme broad selling pressure which fueled by speculation of what the FED will do next.
The demand for physical gold is strong, and scrap selling is light contributing further to the increases according to Asian dealers.
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Gold Price Per Ounce
The gold price per ounce has risen markedly this year hitting an all time high at $1354 an ounce on the Comex division of the New York Mercantile Exchange. Gold is seen as good investment strategy in large part due to a hedge against currency inflation.
Traditionally gold has been the ultimate reserve currency and it has been achieving record highs as the U.S government proposes additional stimulous spending measures.
According to George Gero, VP of RBC Capital Markets Global Futures, “Buyers are using gold and silver to hedge possible losses in purchasing power.”
Suki Cooper an analyst with Barclays Capital said,”The broader macro environment remains favorable for gold with market anticipation of further quantitative easing and concerns about the shape of the economic recovery continuing to support interest.”
Gold is often seen as the real measure of confidence of any currency. The dollar denominated gold often moves against the U.S dollar, as a solid buck makes it more expensive for purchasers who use other currencies. How long will the current gold frenzy last… Dow Theory Letters’ Richard Russell say’s this, “This bull market will not be over until we experience a gold frenzy on the part of the public.”