Gold touches a record high price of $992 as dollar continues to sink
It was once again a record day for bullion metals today, Monday, 3 March, 2008. Bullion metal prices rose sharply higher today after the dollar slumped sharply against its rival currencies. The dollar has been dampened since last year, more since stat of FY 2008 after interest rates were cut twice in January, 2008. Silver prices also gained substantially today, reaching the highest level in twenty eight years.
Since the past few days, the bullion metal prices have been on a roll after the Federal Reserve Chairman, Ben Bernanke hinted that Fed in all possibility will go for another soft landing in its next meeting thereby reducing interest rates by another 50 bps to avoid the US economy in all ways from slipping into a recession.
This fact has been weakening dollar further. Gold, as a dollar-denominated commodity, suffers from dollar strength. On the contrary, gold prices rise with falling dollar as inflationary concerns boosts the metal's appeal as an inflation hedge.
Comex Gold for April delivery rose $9.2 (0.9%) to close at $984.2 an ounce on the New York Mercantile Exchange. Prices touched a record $992/ounce during intra day trading. This year, gold prices have gained 18% till date. In January, prices gained 11%, the highest monthly gain since April 2006. For February, it gained 6%.
Last week, gold gained $27 (2.8%). Prices increased due to the slumping dollar and overall rise in other commodity prices.
Comex Silver futures for May delivery rose by 26.5 cents (1.3%) to $20.18 an ounce. Silver has gained 30% in 2008. The metal had climbed 16% in FY 2007. The metal also has gained for seven straight years. In January this year itself, prices climbed 14%. In February, it gained another 15%.
The Fed has cut the federal funds rate to 3% this year from 5.25% in mid-September, 2007. January 2008 itself saw two rate cuts in a gap of ten days.
In the energy market today, crude-oil futures rose by 65 cents and closed at more than $102.45/barrel due to the dwindling dollar.
In the currency market today, the dollar bumped to a new record low against the euro and three-year lows against the yen, but the greenback pared its losses after U.S. economic data that came out weren't as bad as expected. The dollar index, which measures the greenback against a basket of six major currencies, was at 73.730, compared with 73.754 in late U.S. trading on last Friday.
Gold has traditionally been used as a safe-haven asset against rising inflation. Investor sentiments are boosted by the fact that gold and silver are alternate sources of good investment in the face of declining dollar and rising energy prices. On the other hand strong dollar reduces the appeal of the metal as alternate source of investment.
Gold witnessed the greatest annual gain in twenty eight years by gaining $200/ounce (31%) in FY 2007 as lower interest rates had sent the dollar tumbling, and crude-oil prices rose to a record. The Fed reduced federal funds rate three times in FY 2007. In 2006, silver had jumped 46% while gold gained 23%.
At the MCX, gold prices for April delivery closed higher by Rs 214 (1.7%) at Rs 12,646 per 10 grams. Prices rose to a high of Rs 12,683 per 10 grams and fell to a low of Rs 12,440 per 10 grams during the day’s trading.
At the MCX, silver prices for March delivery closed Rs 664 (2.7%) higher at Rs 25,575/Kg. Prices opened at Rs 25,389/kg and went to a high of Rs 25,900/Kg during the day’s trading.