Precious metals remain a draw after stimulus
The Federal Reserve’s decision to support the US economy by printing dollars lent precious metals a new lustre in the eyes of investors, propelling gold to a fresh record of nearly $1,400 an ounce.
The US central bank announced on Wednesday that it would create $600bn to buy bonds, a move that investors took as a green light to pile into precious metals.
At the same time, concerns over the state of peripheral eurozone economies, which drove a rush into gold in May, resurfaced as Irish bond yields jumped.
“If governments appear clueless, that is good for hard assets.”
In the spot physical market, gold soared to an all-time nominal high of $1,397.85 a troy ounce on Friday afternoon – up 2.9 per cent on the week.
Adjusted for inflation, however, the yellow metal remains a long way from its peak of 1980, which translates to about $2,300 in today’s money.
Silver performed even better, gaining 8.9 per cent on the week to $26.89 an ounce, the highest since 1980.
Tom Kendall, precious metals analyst at Credit Suisse, said gold prices would remain volatile but that buyers would emerge whenever the price corrected. “There have been people all the way through this run-up who have been sitting on the sidelines waiting for a big correction,” he said.
The prospect of QE2 had a similarly positive effect on other raw materials, with the Reuters-Jefferies CRB index of commodity prices rising 4.4 per cent to a two-year high.
Oil touched its highest level since 2008 with Nymex December West Texas Intermediate rising about 7 per cent over the week to $86.85 a barrel. Copper surged to within touching distance of an all-time high – the red metal was up 7.1 per cent to $8,769.50 a tonne.
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