Gold Prices Rise to Record....Gold Prices Rise to Record as Demand Mounts for Alternative to Currencies
By Claudia Carpenter and Pham-Duy Nguyen -Oct 13, 2010 8:14 AM PT
Oct. 8 (Bloomberg) -- Thomas Anderson, head of exchange-traded fundsstrategy and research at State Street Global Advisers, talks aboutstrategy and the growth of gold investments. Anderson speaks withSuzanne O'Halloran on Bloomberg Television's "InsideTrack." (Source:Bloomberg)
Gold futures rose to a record$1,375.70 an ounce amid mounting investor demand for the metalas an alternative to currencies. Silver extended a rally to thehighest level since 1980.
Goldman Sachs Group Inc., UniCredit SpA and Citigroup Inc.have raised price forecasts as gold approached another recordhigh. The dollar was down against a basket of six majorcurrencies on speculation the Federal Reserve will ease monetarypolicy further to spur growth. Bullion has reached a record 15times in the past month.
“Gold has become the world’s third reservable currency asall currencies seem intent upon racing each other downward,”said Dennis Gartman, an economist and the editor of the Suffolk,Virginia-based Gartman Letter. He advised clients to buy themetal.
Gold futures for December delivery climbed $25.40, or 1.9percent, to $1,372.10 an ounce at 11:11 a.m. on the Comex in NewYork. The previous all-time high was $1,366 on Oct. 7.
Goldman Sachs forecast a price of $1,650 in 12 months.UniCredit analyst Jochen Hitzfeld in Munich raised his 2011target to $1,500. Citigroup’s “short and medium term” forecastis $1,450.
“This momentum higher will attract investors toparticipate in the next move up,” said Bayram Dincer, ananalyst at LGT Capital Management in Pfaeffikon, Switzerland.
A Fed purchase of $500 billion of government securitieswould lead to lower interest rates, weighing on the dollar andaiding gold, Dincer said.
Treasury Purchases
In March, the central bank finished $1.7 trillion inpurchases of Treasuries, mortgage-backed securities and housingagency bonds. The Fed has kept its benchmark lending rate atzero percent to 0.25 percent since December 2008.
Gold, which pays no interest, becomes a more attractiveinvestment when borrowing costs decline. Before today, the metalrose 23 percent this year.
“Both gold and the dollar agree that Ben Bernanke will bevictorious in his quest to foment a robust rate of inflation,”said Michael Pento, a senior economist at Euro Pacific Capitalin New York.
Gold for immediate delivery reached a record $1,374.35.
Investors should be prepared for a correction in prices,Deutsche Bank analyst Adam Sieminski said in a report. The 14-day relative-strength index for gold futures has been above 70since Sept. 22, a signal to some traders that prices maydecline.
Investors ‘Wary’
“Investors need to be wary of a short-term correction inthe U.S. dollar during October and with it, a possible setbackto recent price advances” in gold, Sieminski said. “We viewany correction in gold prices over the next three weeks as yetanother buying opportunity. The next hazard for bullish goldinvestors will be the first four weeks of next year, which hasseen the dollar strengthen nine out of the last 12 years.”
Silver futures for December delivery rose 67.8 cents, or2.9 percent, to $23.825 an ounce. Earlier, the price reached$23.885, the highest level since September 1980.
Platinum futures for January delivery gained $29, or 1.7percent, to $1,712.30 an ounce on the New York MercantileExchange.
Palladium futures for December delivery climbed $14.30, or2.5 percent, to $594.95 an oun