Gold futures ran with the bulls Wednesday to settle at their 16th record high in five weeks, as a sputtering U.S. dollar and expected Federal Reserve intervention in the economy drove demand.
Gold for December delivery (GCZ10 1,373, +26.10, +1.94%) closed up $23.80, or 1.8%, to $1,370.50 an ounce on the Comex division of the New York Mercantile Exchange. Gold closed at a record high of $1,354.40 an ounce on Monday.
Adam Klopfenstein, senior market strategist at Lind-Waldock, said a variety of factors are fueling the current rush to gold.
“We’re seeing a consistent weakening in the dollar as we go into the elections; currency intervention as nations want to keep their currencies cheap to prop up exports; strength in equities causing U.S.-based assets to become attractive for foreign investors; future inflation likely to result from quantitative easing -- so gold is wearing more than one hat,” Klopfenstein said.
Klopfenstein, however, cautioned that gold has become too easy to buy and hold in a time of daily record-breaking prices, and expects a correction at some point, although unlikely in the next couple of days.
“The higher we go there’s more potential for a correction so investors need to make sure they manage their risk,” he said.
The dollar fell after minutes from the Federal Reserve’s last monetary policy meeting, released Tuesday afternoon, solidified expectations that the central bank would soon embark on another round of quantitative easing, or special measures that effectively pump more cash into the economy.
The dollar (DXY 77.06, -0.30, -0.39%) , which tracks the performance of the greenback against a basket of other major currencies, fell to 77.0075 from 77.375 late Tuesday. The euro rose to $1.3958 from $1.391.
“Investment demand has become an essential component within the gold market, helping to sustain high prices in the face of an ever-widening gap between supply and fundamental sources of demand,” said Natixis Commodity Markets in a fourth-quarter metals review report released Monday.
“While fears of recession, if not deflation, persist, and while major central banks remain prepared to expand their balance sheets further through an additional round of quantitative easing, gold prices continue to be supported,” the report said.
Wednesday’s action marked a reversal from Tuesday, when December gold fell $7.70 to close at $1,346.70 an ounce in New York, as the dollar recouped some of its recent losses. Also Wednesday, silver returned to its 30-year high, and other metals rallied on the day.
Silver for December (SIZ10 2,407, +91.80, +3.97%) settled up 78 cents, or 3.4%, to $23.93 an ounce. December copper (HGZ10 381.95, +3.00, +0.79%) settled up 3 cents, or 0.8%, to $3.82 a pound, breaking away from the $3.79 level at which it closed in the previous two sessions.
Palladium for December (PAZ10 595.00, +14.35, +2.47%) settled up $13, or 2.2%, to $593.65 an ounce, and platinum for January delivery 1 (PLF11 1,711, +28.00, +1.66%) advanced $24.10, or 1.4%, to settle at $1,707.40 an ounce.
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