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What is behind the latest rally in precious metals prices?

*MarketWatch, by Claudia Assis & Barbara Kollmeyer, February 23, 2012

‘Gold futures rallied Thursday, boosted by a weaker dollar and expectations that central banks will maintain loose monetary policies for some time.

Gold for April delivery advanced $16.30, or 0.9%, to $1,788.20 an ounce on the Comex division of the New York Mercantile Exchange, trading near session highs.

A day earlier, the metal settled at $1,771.30 an ounce, the highest since mid-November.”

”Gold last topped $1,800 an ounce in mid-September after hitting a record $1,891.90 in late August.

Gold’s move higher Wednesday ‘was a reminder, if markets needed it, that central banks are set to remain in accommodative mode for some time to come,’ said Michael Hewson, senior market analyst with CMC Markets.

He said the dovish tone from the Bank of England on Wednesday, last week’s stimulus from the Bank of Japan and a new long-term refinancing operation from the European Central Bank next week will increase money supply and underpin gold prices ‘for some time to come against most [Group of 10] currencies.’

Upside targets: $1,800, then $2,000

‘The key level on the upside lies at the November highs at $1,801 and if we can push above here, then the record highs last year will come back into view, with the likelihood we could well see levels above $2,000 an ounce within the next 12 months,’ said Hewson, in e-mailed comments.”

”Gold futures also got a boost as the dollar fell versus most major rivals.

A weaker dollar is beneficial for gold and other dollar-denominated commodities as it makes them cheaper to holders of other currencies. The dollar index, which compares the U.S. unit to a basket of six currencies, fell to 78.083 from 79.207 on Wednesday.

The euro gained against the greenback after the Ifo Institute’s gauge of German business confidence rose more than forecast for February, and the shared currency earlier broke through resistance at $1.33 to trade above $1.3340, its highest against the dollar since mid-December.

Among other metals, copper for March delivery pared losses, down 2 cents, or 0.5%, to $3.81 a pound.

Silver tracked gold higher, with the March contract building on earlier gains and rallying $1.20, or 3.5%, to 35.46 an ounce.

Palladium turned higher, with platinum adding to earlier gains. Platinum has had steep recent gains on the back of a labor strike called at a top mine in South Africa.

Platinum for April delivery rose $4.60, or 0.3%, to $1,725.40 an ounce. March palladium rose $1.70, or 0.2%, to $719.45 an ounce.

Wednesday saw platinum’s first settlement above $1,700 since late September. For palladium, a settlement of $717.75 an ounce was its highest in five months.”

*This information is solely a highlight of the opinion of a third-party publication and is incomplete.  Please subscribe to this publication for the full and timely opinion of the author and call a Monex Account Representative for any additional up-to-date information. This is not an offer to buy or sell precious metals. Investors should obtain advice based on their own individual circumstances and understand the risk before making any investment decision.

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