Tatyana Shumsky From: Dow Jones Newswires November 05, 2010 6:23AM
GOLD prices set a new record today as investors flocked to the safety of the yellow metal amid escalating inflation and currency worries.
The most actively traded contract, for December delivery, settled up 3.4 per cent, $US45.50, at $US1383.10 per troy ounce on the Comex division of the New York Mercantile Exchange. This was a record settlement price, and the highest settlement since $US1377.60 set on October 14.
The Federal Reserve's $US600 billion monetary stimulus, announced yesterday, helped jump start gold's rally in the latest session. The program aims to stimulate the economy by expanding the money supply, but market participants are concerned the excess liquidity will drive up inflation and depreciate the dollar without generating growth.
The influx of cheap money has carried most commodity futures to multi-month highs in the latest sessions in London and New York. With sugar futures trading at 29-year-high, cotton at an all-time high, crude oil at a six-month high and copper at a 28-month high, investors worry that higher inflation will hit their pocket books much sooner than expected.
Start of sidebar. Skip to end of sidebar. Related Coverage Gold price gains on inflation risks The Australian, 7 days ago Gold price dips as $US strengthens The Australian, 8 days ago Gold price gains on weak $US, risks The Australian, 10 days ago Gold steady as traders await QE news The Australian, 22 Oct 2010 Gold price strikes new record The Australian, 14 Oct 2010 End of sidebar. Return to start of sidebar. "It's going to affect the common folk," said Scott Meyers, senior trading analyst with Pioneer Futures division of MF Global.
"All these prices of these basic staples you need to get through the week are going up."
KEY COMMODITY PRICES: copper, oil, gold, silver, livestock and wheat
These concerns are driving investors to purchase gold, which is considered a hedge against inflation and a store of value.
"The shrinking US dollar and the shrinking economy have people rushing into the precious metals," said Scott Meyers, senior trading analyst with Pioneer Futures division of the MF Global.
A weaker US dollar also helped lift gold prices as currency concerns returned to the market.
The euro was recently at $US1.4255, from $US1.4122 late in the previous New York session. Investors shed the US dollar in favour of gold, which is often considered an alternative currency and a store of value amid economic uncertainty.
US dollar-denominated gold also attracts buyers using foreign currencies when the US dollar weakens, as the precious metal appears cheaper.
"The US dollar is under attack and people are moving money from the US dollar into other investments," said Ira Epstein, managing director of the Ira Epstein division at The Linn Group.
"Its not just gold, it's commodities across the board."
Market expectations of the Fed stimulus helped gold prices hit record highs in October, as concerns over the so-called quantitative easing pushed investors to seek safe harbour in gold futures. But the rally stammered in recent weeks, as a surprise interest-rate rise in China and concerns that the Fed would be less aggressive than expected weighed on gold prices.
The Fed announcement yesterday sparked inflation fears and helped restart gold's historic rally.
"The QE news came in as expected and it's still very inflationary for the US dollar and really bullish for gold," said Fred Schoenstein, metals trader with Heraeus Precious Metals Management.
The rest of the precious metals complex rallied to records alongside gold. Silver settled at the highest level in 30 years. Palladium futures set a fresh 9-year high. Platinum futures set a 27-month settlement high.
The less expensive precious metals like silver and palladium are also seeing increased investor interest as they allow for a larger market exposure at a smaller price.
"This year silver and palladium have performed better than both gold and platinum, so you can get more for your money," said Mr Schoenstein.
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