Friday 24 September 2010

Gold climbed to a record in London and New York as investors sought a protection of wealth and an alternative to a weakening dollar. Silver rose to the highest price since 1980 in London.
The dollar headed for a weekly drop against the euro on concern the Federal Reserve is moving closer to boosting debt purchases, while European equities declined. The metal, which usually moves inversely to the greenback, advanced to a record for the fourth day this week. Silver, also used in industrial applications, headed for a fifth weekly advance.
“Gold is showing there is no confidence in the dollar,” said Bernard Sin, head of currency and metal trading at bullion refiner MKS Finance SA in Geneva. Recent “data has been showing signs of a troubled economy. That’s why we’ve seen this huge buying for investors as a safe haven.”
Immediate-delivery bullion added as much as $5.90, or 0.5 percent, to $1,298.35 an ounce and traded at $1,296.95 at 9:32 a.m. in London. Gold for December delivery was 0.2 percent higher after reaching $1,299.70 an ounce on the Comex in New York.
Silver for immediate delivery in London climbed as much as 1.2 percent to $21.3875 an ounce, the highest price since October 1980.
Gold, up 18 percent this year, is heading for its 10th consecutive annual gain, the longest winning streak since at least 1920. Bullion has outperformed global equities, Treasuries and most industrial metals, prompting record investments in gold-backed exchange-traded products. The metal rallied as central banks and governments maintained low borrowing costs and spent trillions of dollars to stimulate their economies.
‘Every Opportunity’
The dollar slipped to a five-month low against the euro on Sept. 22 after the Fed left its benchmark interest-rate target at a record low and pledged to take more steps to spur growth if necessary. The greenback fell as much as 0.6 percent today.
Gold “is continuing to appreciate at every opportunity,” Darren Heathcote, head of trading at Investec Bank (Australia) Ltd. in Sydney, said today by phone. “We didn’t manage to break and test $1,300 but certainly it looks like it is still on the cards and could happen as soon as today, given the sentiment at the moment is still one of uncertainty.”
While a report yesterday showed U.S. home sales were slightly stronger than economists had forecast, the number of Americans seeking unemployment benefits unexpectedly rose in the week ended Sept. 18 and Europe’s services and manufacturing industries slowed this month more than economists forecast.
Gold, Inflation
Global holdings of gold by ETPs lost 1.41 metric tons to 2,088.32 tons yesterday, after reaching a record 2,089.74 tons on Sept. 22, according to Bloomberg data from 10 providers. Gold is also benefiting from central bank buying, World Gold Council Managing Director Marcus Grubb told Maryam Nemazee on Bloomberg Television’s “On the Move.”
Sixteen of 23 traders, investors and analysts surveyed by Bloomberg, or 70 percent, said the metal will increase next week. Six forecast lower prices for the metal and one was neutral.
Prices have gained this year even as U.S. inflation slowed. Bullion is traditionally bought as a hedge against rising consumer prices. Inflation expectations, based on the 10-year U.S. Treasury breakeven rate, have fallen to 1.81 percent from 2.25 percent six months ago.
Silver last traded up 1.1 percent at $21.3475 in London. The metal is up 27 percent this year. Silver futures added as much as 1 percent to $21.43 on the Comex in New York, the highest level since March 2008.
Silver ‘Undervalued’
“Silver is very much undervalued,” MKS Finance’s Sin said. “It’s trading on the back of gold.”
Holdings in the iShares Silver Trust, the biggest ETP backed by silver, jumped 73.04 tons to a record 9,582.59 tons yesterday, according to figures on the company’s website. The metal doubles as a store of value and as a raw material for industry.
Platinum added 0.2 percent to $1,643.25 an ounce. Prices reached $1,645.75 yesterday, the highest level since May 19. Palladium gained 1.5 percent to $559 an ounce.

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