Gold prices rallied to record highs in Europe on Wednesday on fears moves by the Federal Reserve to tackle the sluggish US economy would undermine the dollar, boosting investment in bullion as an alternative asset.
Spot gold hit a record $1 313,20 and was bid at $1 309,45 an ounce at 1116 GMT, against $1 307,40 late in New York on Tuesday. US gold futures for December delivery rose $2,60 an ounce to $1 310,90.
Gold’s strength also lifted other precious metals, with silver reaching a fresh 30-year peak, palladium its highest level since March 2008 and platinum a four-month high.
“Gold is flying because of concerns over a weakening dollar, and the prospect of quantitative easing,” said David Wilson, an analyst at Société Générale.
“Our internal house view is for a slight softening of the dollar over the next 3-6 months.
“We are not convinced the European economy is going to be doing particularly well next year either,” he added.
“It is going to be a kind of competition (to show) who will be worse out of the two.”
The dollar fell 0,3% against a basket of six other currencies yesterday as falling US Treasury yields and below-consensus US data increased expectations the Fed would take further steps toward quantitative easing.
The US currency fell to a five-month low against the euro and a two-year trough against the Australian dollar.
“The backdrop for the dollar continues to deteriorate,” JPMorgan said.
“The increased focus on QE and the break of several key dollar support levels maintained the overall bearish bias.” The bank advised selling into any signs of strength.
Buying in India, the world’s biggest gold consumer, rose yesterday despite the hike in spot prices, as strength in the rupee helped shield local buyers from the rise.
Scrap sales have also slowed after prices retreated from their rupee peak, with sellers waiting for prices to breach the 20 000-rupee level from around 19 100 rupees currently.
Investment interest in gold was also firm, with holdings of the world’s largest gold-backed exchange-traded fund, New York’s SPDR Gold Trust, climbing just over five tons on Tuesday.
Holdings of the largest silver ETF, the iShares Silver Trust, also rose on Tuesday, climbing 143 tons to a record high of 9 756 tons.
Silver prices responded by marking another 30-year high at $22,00 an ounce, before easing back to $21,84 an ounce against $21,69. Gains in silver are outstripping those of gold.