New York gold futures rose to a record high early Wednesday, nearing $1,000 an ounce, while silver closed in on $20 per ounce as the falling dollar and speculation of further US rate cuts continued to fan investor buying of commodities.
Gold bullishness was reaffirmed by weak US economic data and after US Federal Reserve Chairman Ben Bernanke reassured that the central bank was ready to cut interest rates again to prevent the distressed housing and credit markets from further damaging a weak economy.
The benchmark April gold contract at the COMEX division of the New York Mercantile Exchange settled $12.10, or 1.3 percent, higher at $961.00, striking its third all-time high in a row overnight at $967.70 off a low of $951.80.
Patrick Fearon, precious metals analyst of A.G. Edwards & Sons in St Louis, said that gold surged due to a combination of an initial rally in oil, Bernanke's comments and a tumble in the dollar. Delivering the Fed's semi-annual report on the economy to Congress, Bernanke took note of recent elevated readings on inflation but made clear the central bank's main concern was the economy would fail to revive later this year.
The Fed has lowered benchmark overnight interest rates to 3 percent from 5.25 percent since mid-September and financial markets expect policy-makers to lower them by a further half-percentage point at their next meeting on March 18. A surprisingly large 5.3 percent drop in January orders for durable goods had weighed on US stocks in the morning session.
Gold held its gains in spite of a sharp turnaround in crude oil, which initially set a record above $102 a barrel on Wednesday. US crude futures settled down $1.24 at $99.64 a barrel due to rising inventories.
Gold is used as a hedge against inflation. Still, while oil is basically at a record price in real terms, as well as current prices, gold is far from a real inflation-adjusted record, which analyst GFMS has put as high as $2,079 an ounce.
Spot gold at 2:15 pm in New York was quoted at $957.50/958.30, up from $946.60/947.40 at the close on Tuesday. London bullion dealers fixed the afternoon spot price at $959.50. The last time silver traded at these prices was in November 1980, when the bubble created by the Hunt Brothers of Texas cornering the silver market in the 1970s was deflating.
COMEX March silver finished up 49 cents, or 2.6 percent, to $19.21 an ounce, trading from $18.79 to $19.49 overnight, which marked a contract high. Spot silver fetched $19.22/27, up from the close at $18.65/18.70. London silver was fixed at $19.33.
NYMEX platinum was cooling from its rally to a record high at $2,214 an ounce last week. A power crisis in top producer South Africa has hampered mine operations and the expectation of a huge market deficit is expected to continue to support the white metal.
The active NYMEX platinum contract for April delivery closed down $3.60 at $2,152.30 an ounce. Spot platinum fetched $2,130/2,140. The NYMEX March palladium contract ended up $19.20, or 3.6 percent, to $555.55 an ounce. Spot palladium fetched $550.00/555.00.