[miningmx.com] — London – Gold rallied to a second successive record high on Wednesday, powered by a slide in the dollar and by ongoing investor demand for safe-haven assets, while silver hit fresh 31-year peaks.
Unrest across the Arab world and unease over the eurozone’s debt finances are encouraging inflows of cash into gold, with the metal’s price having risen by more than 2% this week.
This has more than offset the potentially damaging impact of China’s latest interest rate rise and a less pessimistic take on the US economy from the Federal Reserve.
The focus this week is on Thursday’s three central bank policy meetings. The European Central Bank (ECB) is almost guaranteed to raise rates, thereby boosting the euro against the dollar, while the Bank of Japan and the Bank of England are expected to hold their fire.
Spot gold was last up 0.4% at $1 456.25 an ounce in morning trade, having hit an all-time high of $1 458.80 earlier in the day. Gold has rallied by more than 5% in the past three weeks.
COMEX June gold futures were last up 0.4% at $1 457.80, having touched a contract high of $1 460.00.
“Six months from here, we think (the strength) is sustainable for both gold and silver, but I wouldn’t be surprised if we see a short-term pullback because a lot of this is driven by the euro, which is pretty strong against the dollar,” said Standard Bank analyst Walter de Wet.
The dollar fell to 14-month lows against the euro, which rallied to an 11-month peak against the yen ahead of the first rate rise from the ECB since July 2008 to tackle rising inflation pressures.
Three banks, three policies
The minutes from the US Federal Reserve’s most recent meeting, released on Tuesday, did not contain anything to suggest the central bank would end its $600bn bond buying programme ahead of time.
“With gold close to its highs, there could be some reluctance to buy at these elevated levels, especially given the uncertainty surrounding US monetary policy and the expected ECB rate hike tomorrow,” said UBS strategist Edel Tully.
“While a move to monetary policy tightening is not necessarily gold-positive, the inflation risks spurring the eurozone tightening are supportive of gold,” she said.
Record high food prices and oil prices at two-and-a-half-year highs have stoked inflationary pressures around the world, adding to the case for owning gold, which can help mitigate the impact of rising price pressures on an investment portfolio.
The world’s central banks are tackling inflation by tightening monetary policy – a potential negative to gold, which bears no yield.
But most benchmark interest rates when adjusted for inflation will remain in negative territory, including those in China, which raised rates on Tuesday for the fourth time since October.
Reflecting the pick-up in investor demand for gold was the first inflow of metal into the SPDR Gold Trust, the world’s largest exchange-traded fund (ETF), since March 16.
Global holdings of gold in the largest ETFs are down 3.3% or 2.09 million oz so far this year, but have risen by nearly 200 000 oz in the last month alone.
Silver has reaped the benefits of investor demand for safe-haven assets and protection from inflation and on Wednesday rose to its highest level since January 1980.
Spot silver was last at $39.33 an ounce, having risen earlier by as much as 0.6% to $39.48.
Holdings of silver in the world’s largest ETF, the iShares Silver Trust, are at a record 11 162.45 tonnes, having risen by more than 240 tonnes so far this year.
Platinum and palladium were both up on the day, lifted by strength in other industrial commodities such as copper and crude oil, which held near two-and-a-half-year peaks.
Spot platinum was last up 0.5% at $1 793.00/oz, while palladium was up 0.1% at $787.22.
