Gold surged to a record high near $1,375 an ounce on Wednesday and silver hit a 30-year peak after the Federal Reserve signalled the US economy may need extra stimulus, which hit the dollar. Gold prices have rallied around 25 percent so far this year as investors turned to the metal as a haven from the effects of an increasingly loose monetary policy.
-- Silver hits 30-year peak
Spot gold hit a peak of $1,374.15 an ounce and was bid at $1,372.05 an ounce at 1500 GMT, against $1,349.60 late on Tuesday. US gold futures for December delivery rose $26.00 to $1,372.70, having earlier touched a record $1,375.70. Silver hit a peak at $23.85, its strongest level since 1980, and was later bid at $23.78 an ounce against $23.28.
"Because we are in a world of quantitative easing in the developed economies, and as QE is almost synonymous with competitive devaluation...gold and the precious metals (are) taking on the function of an alternative currency," said Ashok Shah, chief investment officer at London and Capital.
"As we go into the next 1-4 quarters, the role of precious metals as alternative currency will become much more paramount," he said. "The role of gold as an inflation hedge is not important now, but it may become important in the next cycle, when the time to reverse quantitative easing comes." Edel Tully, precious metals strategist at UBS, said the bank's physical sales to India were above the year-to-date average ahead of Diwali, a key period for Indian gold buying.
"Separately, scrap supply is certainly visible at the refineries, but we don't believe it is at levels which can on its own curtail gold rallies," she said in a note. Meanwhile, spot palladium rose as much as 2.5 percent to a one-week high of $594.50 an ounce, aided by the weaker dollar and evidence that investors are continuing to buy into one of the top performing commodities of 2010. Outstanding shares in ETF Securities' US-listed palladium exchange-traded fund, the world's largest palladium ETF, staged their largest one-day rise in six months on Tuesday, indicating strong inflows of metal.
With palladium up 45 percent so far this year and close to its highest in over nine years, the platinum-palladium ratio, or the number of ounces of palladium used to buy an ounce of platinum, fell to 2.87, its lowest in more than six years. Palladium was bid at $591.50 an ounce against $580, while platinum was at $1,706.50 an ounce versus $1,675.
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