LONDON: Gold prices rose again, touching $1,350 an ounce in Europe, and silver touched a new 30-year high on Monday. It came amid rumors that the United States will shortly introduce further monetary easing.
Spot gold was bid at $1,348.70 an ounce at 1122 GMT, against $1,343.25 late in New York on Friday. US gold futures for December delivery rose $4.50 an ounce to $1,349.80. Spot gold is still within sight of last week’s record $1,364.60.
The dollar slipped on Monday after world finance ministers failed to reach agreement on currency imbalances at a series of meetings this weekend, leaving the US Federal Reserve set to pursue loose monetary policy to support its ailing economy.
“We don’t seem to have any agreement on any sort of currency accord,” said Citi analyst David Thurtell.
An inverse link between gold and the dollar has been particularly strong in recent weeks, he added. “Gold has pretty much stuck to tracking dollar moves.”
Historically a weaker dollar boosts gold as it makes dollar-priced commodities cheaper for other currency holders and lifts the metal’s appeal as an alternative asset.
This correlation weakened early this year as both gold and the dollar benefited from concerns over European sovereign debt levels. However, it has now reasserted itself.
“Precious metals… continued to benefit from a weak U.S. dollar and the ‘race to the bottom’ in global currency markets,” said Morgan Stanley in a note.
“We view QE (quantitative easing) and its monetary consequences as an unequivocal benefit for gold and silver in particular, as investors seek out their role as stores of value in times of fiat currency risk.”
As well as currency effects, gold is being supported by expectations that investors will add to their bullion holdings as a portfolio diversifier, both in the private and official sectors.
Russia’s central bank has bought over 100 tons of gold on the domestic market this year, board member Sergei Shvetsov said on Monday, and speculation is rife that other central banks, mainly in Asia, will also lift their holdings.
Investor demand
New investment products are also emerging, with two money managers in China vying to launch the country’s first gold funds as early as this year to meet investor demand for the precious metal.
Meanwhile South Africa’s Standard Bank said on Monday it would act as the first metal provider, participating dealer and market-maker for a Hong Kong-based firm that plans to launch a new gold exchange-traded fund (ETF).
Gold supply is struggling to meet rising demand. Output in number one producer China was 27.655 tons in August, the Ministry of Industry and Information Technology said on Monday, down 11 percent from 31.059 tons in July.
Among other precious metals, silver hit its highest level since 1980 at $23.65 an ounce and was later bid at $23.36 an ounce against $23.20.
Holdings in the iShares Silver Trust, the world’s largest silver-backed exchange-traded fund, rose to a new all-time high at 10,085.62 tons on Friday.
The gold-silver ratio – the number of ounces of silver needed to buy an ounce of gold – fell to its lowest in more than two years on Monday near 57, down from above 68 in late August, as silver became increasingly expensive compared with gold.
“We continue to favour silver as industrial demand and imports into China are expected to push the gold/silver ratio lower,” said Deutsche Bank in a weekly note.
Meanwhile platinum was at $1,693.50 an ounce against $1,699.35, and palladium at $587 against $583.53.
