Gold climbs to all time high on greenback speculation
Published: 06 October, 2009, 17:17
Edited: 13 October, 2009, 09:01
TAGS: Markets, Commodities, Russia and the global economy, Finance
Gold has climbed to an all time high on renewed speculation about the U.S. dollar, after a report by British journalist Robert Fisk suggested key economies were planning to move away from the dollars reserve status.
On Tuesday the spot gold price has moved to $1036.00 per ounce in the wake of a report by Fisk in Britain’s Independent newspaper saying that Gulf Arab and Chinese banking sources in Hong Kong had confirmed that Gulf States, along with China, Russia, Japan, and France are planning to end dollar based trading in oil, and that a new currency was being planned for member nations of the Gulf Cooperation Council.
The renewed speculation about the US currency has seen buoyant gold prices hold at just over the $1000 per ounce mark in recent weeks with Anton Polyakov, senior analyst at TeleTrade, saying the strength of gold was a reflection of the waning greenback.
“There’s a direct correlation. Investors just switch to the alternative, which is now gold, when a reserve currency looses ground.”
Also agreeing that the two phenomena are closely related is Danila Levchenko, Chief Economist at Otkrytie, who adds that although it is the most obvious beneficiary the dollars weakening adds to the inflationary potential of anything priced in the US currency.
“In fact, we have global dollar inflation today, and it’s quite difficult to say exactly whether goods are just becoming more expensive or Dollar is weakening, as almost all world markets use US Dollars. So, to say that Dollar is weakening means virtually the same as the gold price is going up. These two processes are highly correlated.”
The reports of a concerted move to switch to pricing in a currency other than the U.S. dollar have been rejected by Saudi Central Bank Governor Muhammad al-Jassar who caled the report "absolutely incorrect" with Japanese Finance Minister Hirohisa Fujii replying that he "doesnt know anything about it," when asked about such talks. Russian Deputy finance Minister, Dmitry Pankin, has also told Interfax that russia is not holding talks on replacing the dollar for crude sales.
06.10.2009, 16:55
2 comments
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Precious metals are so undervalued today in light of the world economic situation. It is too late to turn back the clock and guarantee all currency with precious metals. Perhaps this is where the world financial system got off track by not backing currency with gold, dollar for dollar. It would definitely be in every country's interest to stock up on precious metals because no one knows what paper money will do in the future. Paper money, like an insurance policy, is nothing more than a promise. Gold is tangible and over the years increases in value. Precious metals, in light of the current world situation, would not be overvalued at five times the current price.