Gold’s New Record Highs on BOJ’s Buying Assets and Zero Interest Rates

Gold

Gold rose in all currencies and rose 1% to new record dollar highs (nominal) at $1,327.90/oz this morning. The Bank of Japan pledged to pump more funds into the struggling economy and keep rates "virtually at zero". This surprised markets and given that the Federal Reserve and other central banks look set to soon provide fresh injections of economic stimulus is leading to demand for gold as a store of wealth.

Gold is currently trading at $1,330.50/oz, €964.76/oz, £837.71/oz.

Gold in Yen – 30 Day (Tick). Click on image to view full size.

"Comprehensive monetary easing" (as described by central bank Governor Masaaki Shirakawa) should lead to a weaker yen and gold rising in yen terms and in other fiat currencies. Gold rose to its highest price in Japanese yen since June at 111,036 yen per ounce.

Gold in Yen – 1 Year (Daily). Click on image to view full size.

While stock markets have reacted somewhat favourably to the Japanese central bank announcement, the dollar and most currencies fell versus gold. It is a another sign that central banks are engaged in competitive currency devaluations and are willing to debase their currencies in order to avert deflationary pressures and to gain a short term export driven economic advantage.

The US Mint plans to discontinue offering the one-ounce American Eagle Silver Uncirculated coin and the one-ounce American Eagle Gold Uncirculated coin this year, according to Bloomberg.

Silver

Silver has risen again to multi year highs and its highest price level since September 1980. Silver’s relative undervaluation versus gold is seeing continuing diversification. Indeed, some clients have recently been taking profits on gold and allocating funds to silver.

Silver is currently trading at $22.29/oz, €16.17/oz and £14.04/oz.

Platinum Group Metals

Platinum has risen to over $1,685/oz which is its highest price level since May 18th.

Platinum is trading at $1,683.00/oz, palladium is at $568/oz and rhodium is at $2,175/oz.

Bloomberg used our research in an article yesterday – Record Gold, Rising Food Costs May Mean Inflation: Chart of the Day

Mark OByrne

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