(emphasis mine) [my comment]
Monday, 9 November 2009
Gold hits new high on weak dollar
Demand for gold increases in the run-up to Christmas
The price of gold has touched a new all-time high as the precious metal becomes increasingly attractive compared with the weakening dollar.
Gold rose by almost $12 to hit $1,107.2 an ounce, compared with $1,095.7 at the previous close.
Growing demand from emerging markets, particularly in Asia, is also helping to drive the price of gold.
Gold and other commodity prices have surged recently as investors have moved away from the US dollar.
The dollar has fallen by 13% against the pound this year, and by 7% against the euro.
"The dollar will continue to have a very big impact on metals and gold", said Afshin Nabavi at gold bullion refiner MKS Finance.
Increased demand among emerging market governments looking to diversify their foreign exchange holdings has also pushed the price of gold higher.
There is also higher demand from individuals. The price of gold is typically strong in the October-to-December period because of the higher demand for jewellery in the run-up to Christmas and the Indian festival of Diwali.
Bloomberg reports that gold rises to record as falling dollar boosts investment demand.
Gold Rises to Record as Falling Dollar Boosts Investment Demand
By Nicholas Larkin and Pham-Duy Nguyen
Nov. 9 (Bloomberg) -- Gold futures climbed to a record for the second straight session as the slumping dollar spurred demand for the precious metal as an alternative investment.
The greenback slid to a 15-month low against a basket of six major currencies after the Group of 20 industrial nations maintained economic stimulus measures. Before today, gold climbed 24 percent this year, while the dollar dropped 6.8 percent. Last week, the Federal Reserve held U.S. interest rates at historic lows.
"It looks like gold will carve out new highs until further notice," said Michael Guido, a director of hedge-fund sales at Macquarie Capital USA Inc. in New York. "The Fed made it quite clear that rates are going nowhere. The dollar is sinking. The bullish holders of gold are adding positions when the market makes a new high."
CNN reports that gold continues its record run.
Gold continues its record run
The precious metal pushes further above $1,100 an ounce, after a 5% gain last week, as the dollar weakens broadly.
By Ben Rooney, CNNMoney.com staff reporter
Last Updated: November 9, 2009: 9:56 AM ET
NEW YORK (CNNMoney.com) -- Gold rose to a record high Monday as the dollar weakened against rival currencies.
December gold was up $12.10 to $1,107.80 an ounce, after climbing to an all-time trading high of $1,109.90 earlier in the session.
Gold gained 5% last week on speculation that central banks around the world will begin buying more of the precious metal as an alternative to the dollar,
which is the traditional global reserve currency. [gold has a much longer history as the global reserve currency]
The dollar fell Monday after a meeting of finance ministers from the Group of 20 major economies over the weekend ended without a definitive plan to tackle rebalancing global money flows.
The dollar index, which gauges the greenback's value against a basket of currencies, slid 0.9% to a two-week low of 75. So far this year, the dollar has lost more than 7% against its main rivals.
Gold has gained more than 23% this year, and many traders expect the rally to continue into next year given the outlook for continued weakness in the dollar.
CNN reports that dollar weakens broadly.
Dollar weakens broadly
The greenback tumbles against rivals after an IMF report suggests it could fall further and the G-20 is mum on the U.S. currency's decline.
By Ben Rooney, CNNMoney.com staff reporter
November 9, 2009: 8:35 AM ET
NEW YORK (CNNMoney.com) -- The dollar fell broadly Monday, with the euro climbing above $1.50, after a report from the International Monetary Fund suggested the U.S. currency could fall further.
The greenback was also under pressure after a weekend meeting of the G-20 failed to address the greenback's ongoing decline. [suggesting that they are willing to accept a weaker dollar]
The Group of 20 major economies ended a weekend meeting in Scotland without mentioning the dollar in their communiqué. But the G-20 did announce a "framework" in which they will discuss how to reduce trade and savings imbalances between nations.
The G20's decision to focus on fiscal policy, leaving monetary policy unchanged, "highlighted that global leaders continue to believe that it is too early to implement an exit strategy and that the commitment to global growth remains the priority," said Camilla Sutton, currency strategist at Scotia Capital in Toronto.
"We think this will re-focus markets on relative interest rates," Sutton said.
Last week, the Federal Reserve announced plans to hold interest rates at historic lows near 0% for an "extended period." The expectation for low interest rates going forward was reinforced Friday when the U.S. government said the nation's unemployment rate rose to 10.2%
As other nations move to raise interest rates, analysts say the dollar will continue to be used to fund carry trades, which could push the greenback even lower.
Meanwhile, the dollar continues to suffer as investors' appetite for risk grows and demand for the greenback as a safe haven wanes.
Gold Prices Showing Familiar Pattern
Chinese buying is once again driving gold to new highs while US selling desperately tries to drive it back down. The graph below shows Asian buying droving gold over $1,100 yesterday.
Gold Open Interest Also Showing Familiar Pattern
Dollar Collapse is already underway
The 1 year chart below shows how gold prices are breaking upwards. Remember, gold isn't rising, the dollar is falling.
The dollar index, which gauges the greenback's value against a basket of currencies, is breaking down.
Soon the dollar will start setting new record lows, and confidence in the dollar will start to crumble.
Dollar Panic will begin in early 2010
The dollar' gentle decline will not continue forever. Within a few months, the dollar's slow collapse will turn into a dollar panic. Individuals, companies, and governments will all try to get rid of their dollars at the same time by buying foreign currencies, precious metals (gold/silver), and hard assets (commodities, real estates, artwork, etc). It will be vicious and ugly.