Sunday, September 19, 2010

Gold hits new peak of US$1,283

By Richard Evans (UK Telegraph): Gold struck fresh record highs on Friday as the dollar waned on mounting expectations that the Federal Reserve will pump more money into the flagging US economy.

Neil MacKinnon, an analyst at VTB Capital, told AFP: "Gold is making a new high and stocks are rallying because the markets think the Fed will print more money before the end of this year just to ensure that the US economy remains on an even keel.

"The risk for investors is that the US economy does actually fall into a 'double-dip' [recession] and not the 'soft landing scenario' which the markets are currently discounting."

Gold struck an all-time high close to $1,283 an ounce on Friday after chalking up a series of records this week. It hit $1,282.97 on the London Bullion Market before easing slightly to stand at $1,280.95.

"Traditionally we see investors flocking to gold in times of market troubles, but this relationship is out the window this week as inflation concerns, expectations for further quantitative easing from the Federal Reserve and technical triggers have driven [the gold price up]," said analysts at the trading group Spead Co.

Marcus Grubb, managing director of investment at the World Gold Council, said: "The gold price hit a new all-time high again today against a sluggish economic backdrop and uncertain public finances in Europe and the United States.

"The continued strength of the Chinese economy leading to a gold enhancing appreciation in the Renminbi against the US dollar has spurred the market."

He added that, following the purchase of 10 tonnes of gold from the International Monetary Fund by the central bank of Bangladesh last week, rumours abounded of official sector buyers coming into the market.

"Gold is clearly in focus as a reserve asset in the current macro and financial climate," he said. "The news that AngloGold Ashanti, Africa's largest gold producer, has raised $1.53bn through a share and convertible issue to cancel gold hedges also represents a strong vote of confidence in the market."

In a recent survey by Bloomberg, the average of analysts' predictions for the gold price was $1,500.

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