NEW YORK (TheStreet ) -- Gold prices catapulted to record highs Wednesday as Ben Bernanke's testimony to the House Financial Services Committee reaffirmed the possibility of more monetary easing.
Gold for August delivery added $17 to $1,585.80 an ounce, a record settle, at the Comex division of the New York Mercantile Exchange. The gold price has traded as high as $1,588.90, a high, and as low as $1,564.60 while the spot gold price was popping $18, according to Kitco's gold index.
Silver prices were following gold higher up $2.51 to close at $38.15 an ounce. The U.S. dollar index was down 1.13% at $75.22 and the euro was climbing 1.29% vs. the dollar.
Gold and silver popped Wednesday as investors piled into the safe haven metals after theFederal Reserve hinted at more quantitative easing. In the latest FOMC minutes released Tuesday, certain Fed policymakers expressed their willingness to consider QE3 if inflation dropped and unemployment stayed high.
Ben Bernanke, in his testimony to the House Financial Services Committee, did nothing to disavow this rumor. Bernanke cited deflation as a possible future risk as well as the unexpectedly disappointing economic environment.
More money in the system heightens the risk of long term inflation meaning the U.S. dollar would be worth less over time making gold and silver safer places to stash cash.
Although some investors will take advantage of the rally to take profits, others will look to buy gold so as not to miss a run to $1,600 an ounce. George Gero, senior vice president at RBC Capital Markets, says that funds are rushing into gold right now. "All the elements of buyers needs were there as we have eurozone, Middle East, debt ceiling and Chinese inflation to contend with."
Gero also says that traders would be attracted by the higher highs and high lows the gold price has been making. Any traders who had been betting against gold were be forced to buy back those positions, which gave an extra boost to prices.
Gold is moving into "uncharted territory as investors seek to diversify into safe-haven as debt concerns mount after Moody's cut Ireland's debt rating to junk while the August 2nd deadline for raising the US debt ceiling looms even closer," says James Moore, research analyst at FastMarkets.com. This time silver isn't missing the safe haven party.
Silver prices are not only rallying with gold but also benefiting from the fact that China said its economy grew 9.5% in the second quarter while industrial production for the first half of the year rose more than 14% year on year. Many experts had been worried that China would slow its growth too fast after implementing three rate hikes in 2011 alone along with countless reserve requirement increases.
Although inflation is still high at 6.4%, which could prompt more rate hikes and make the likelihood of a soft landing far from certain, China is still growing which will result in strong demand for gold and silver, both as a safe haven and industrial metal.
Mihir Dange, founder of Arbitrage, was sideways to bullish on Tuesday before the FOMC minutes and Moody's downgrade but says he went long last night and sold some out for profits. "Still staying long as we just made new highs ... [now] let's see now if it stays up or gravitates back to $1,550.
Anthony Neglia, president of Tower Trading, who was also on the sidelines Tuesday, was skeptical that silver's rally would last. "[I] don't know if it can right now [there are] only 68,000 contracts which is not that much for that kind of rally." Neglia thinks higher silver prices could have been from the first leg of short covering.
No comments:
Post a Comment