Gold prices hit high for the year

Gold prices hit $1,790 an ounce in Friday trading, before falling back to $1,778. Gold prices rose on hopes of economic stimulus from a Spanish bailout.

Gold has hit a high for the year on speculation that Spain may be working on a request for financial help from other European countries.

December gold rose $7.80 to finish at $1,778 per ounce. Earlier Friday, it hit $1,790 per ounce, which topped the previous 2012 high, set in late February.

Analysts speculated that Spain is working on an economic reform plan that will include a request for bailout funding from Europe.

The country's borrowing costs have dropped sharply since the European Central Bank said recently it will buy unlimited amounts of government bonds to help countries with heavy debt loads. Those borrowing costs probably will rise again if Spain doesn't request a bailout soon, analysts said.

In the U.S., the Federal Reserve also has put a plan in place to encourage economic growth.

Such economic stimulus programs continue to benefit gold prices, said Phillip Streible, a senior commodities broker at RJ O'Brien.

Investors buy gold as a hedge against inflation and volatility in currencies. Gold is priced in dollars but can be converted into any currency.

Other commodities were mostly higher as traders waited for more clues about how the global economy will fare under economic stimulus programs in several countries.

Original article:

http://www.csmonitor.com/Business/Latest-News-Wires/2012/0922/Gold-prices-hit-high-for-the-year

Gold’s Heading to $2000, Strategists Say

Gold is still struggling to top the year-to-date high set back in February, despite the boost bullion prices got last week from the Fed’s latest loose-money plan.

But Wall Street is feeling enthusiastic about gold nonetheless, in the wake of the announcement that the central bank will buy up billions in mortgage-backed securities every month for the foreseeable future. On Tuesday Deutsche Bank and Bank of America Merrill Lynch both predicted in research notes that gold will shine in the months ahead.

Deutsche Bank said gold prices would top $2,000 per ounce in the first half of 2013, which would represent at least a 13% gain over Tuesday’s settle price of $1,768.40 in the New York futures market – as well as a new record high in nominal terms, well above the $1,888.70 hit in August 2011. Gold hit its high for 2012 on Feb. 28, when prices settled at $1,787.

“We expect the gold market to continue to respond positively to further central bank activity – which in our view is likely to continue to be biased towards further monetary expansion,” the bank’s analysts wrote.

Original appeared at:

http://blogs.wsj.com/marketbeat/2012/09/18/golds-heading-to-2000-strategists-say-thanks-qe3/?mod=google_news_blog

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Gold spikes 2 percent

Gold shot up 2 percent on Friday for the second time in two weeks, hitting six-month highs as a tepid U.S. jobs report strengthened expectations of further monetary easing by the Federal Reserve.

Extending a month-long rally, spot gold bolted up by $30 an ounce just after the U.S. Labor Department reported that nonfarm payrolls rose 96,000 last month, well short of expectations for a 125,000 rise.

The numbers stoked expectations that Fed policy makers will agree at next week's meeting to launch a third round of government bond buying, or quantitative easing, also known as QE3, to stimulate the world's largest economy.

"Gold is going through the roof because this negative data makes QE3 more likely now," said Daniel Briesemann, commodities analyst at Commerzbank in Frankfurt.

Spot gold ended the day up 2.06 percent at $1,736 per ounce, having touched its highest level since February. Copper also rallied while the dollar .DXY dived more than 1 percent.

U.S. futures settled up 2.05 percent at $1,740.5 an ounce after hitting $1,745.4, also the highest since February.

Bullion outperformed the euro, which hit four-month highs against the dollar, and the broader market. Silver and platinum also rose.

The Thomson Reuters-Jefferies CRB index .CRB of 19 commodities rose 0.9 percent.

Bullion secured its third straight weekly gain, the longest streak since January. With growing hope for monetary stimulus in Europe and the United States, investors boosted holdings of bullion by exchange-traded funds (ETFs) to a record this week.

Investors who had taken short positions in gold have been punished two Fridays in a row. Last week prices jumped 2 percent.

"A lot of people didn't jump on the bandwagon (ahead of the data). The shorts are in trouble and will day trade out," George Nickas, commodities broker at INTL FCStone, said.

QE VS THE CHARTS

Many investors worry that a third round of quantitative easing by the Fed -- printing money to buy government bonds to keep long-term interest rates low -- will lead to higher inflation. Gold prices doubled in the last four years, as the Fed implemented the first two rounds of quantitative easing.

Gold has rallied almost 10 percent since the start of August, pushing its 14-day relative strength index to 80, well above the 70 level that signals an overbought market to technical analysts.

Still, chart watchers say the rally may have further to run after gold broke out of a six-week trading range when it pierced $1,636 on August 21.

Thursday's close above $1,700 per ounce provided psychological support to gold bulls, who had pushed prices to 5-1/2-month highs after the European Central Bank unveiled plans for a bond-buying program to stem the euro-zone debt crisis.

ETF HOLDINGS

Investor appetite for hoarding gold shows no signs of abating. Holdings of gold-backed exchange-traded funds hit a record high of 72.1 million ounces, or 2,044 metric tons, by Thursday. ETF holdings were up more than 38 metric tons this year, with most of the rise occurring since August when hopes for stimulus from central banks started to run high.

Read more: Here

Why is Putin stockpiling gold?

Commentary: Russia is bulking up its gold reserve

I can’t imagine it means anything cheerful that Vladimir Putin, the Russian czar, is stockpiling gold as fast as he can get his hands on it.

According to the World Gold Council, Russia has more than doubled its gold reserves in the past five years. Putin has taken advantage of the financial crisis to build the world’s fifth-biggest gold pile in a handful of years, and is buying about half a billion dollars’ worth every month.

It emerged last month that financial gurus George Soros and John Paulson had also increased their bullion exposure, but it’s Putin that’s really caught my eye.

No one else in the world plays global power politics as ruthlessly as Russia’s chilling strongman, the man who effectively stole a Super Bowl ring from Bob Kraft, the owner of the New England Patriots, when they met in Russia some years ago.

Putin’s moves may matter to your finances, because there are two ways to look at gold.

On the one hand, it’s an investment that by most modern standards seems to make no sense. It generates no cash flow and serves no practical purpose. Warren Buffett has pointed out that we dig it out of one hole in the ground only to stick it in another, and anyone watching this from Mars would be very confused.

You can forget claims that it’s “real” money. There’s no such thing. Money is just an accounting device, a way of keeping track of how much each of us produces and consumes. Gold is a shiny and somewhat tacky looking metal that is malleable, durable and heavy. A recent research paper by Duke University’s Campbell Harvey and co-author Claude Erb raised serious questions about most of the arguments in favor of gold as an investment.

But there’s another way to look at gold: As the most liquid reserve in times of turmoil, or worse.

The big story of our era is not that the Spanish government is broke, nor is it that Paul Ryan apparently feels the need to embellish his running record. It’s that the United States, which has dominated the world’s economy for several lifetimes, is in relative decline.

As was first reported here in April of last year, according to International Monetary Fund calculations, the U.S. is on track to lose its status as the world’s biggest economy—when measured in real, purchasing-power terms—to China by 2017.

We will soon be the first people in two hundred years to live in a world not dominated by either Pax Americana or Pax Britannica. This sort of changing of the guard has never been peaceful. The declines of the Spanish, French and British empires were all accompanied by conflict. The decline of British hegemony was a leading cause of the First and Second World Wars.

What will happen as the U.S. loses its pre-eminence?

Maybe this will turn out better than similar episodes in the past. Maybe the Chinese will embrace an open society and the rule of law. If you believe that, there is probably no reason to hold any gold.

On the other hand, we may be about to enter a much more turbulent and dangerous era of power politics and international competition.

Not long ago, world gold reserves were mainly in the hands of the U.S. and the Europeans, which accumulated their holdings during their centuries at the top. The U.S. has 75% of its currency reserves in gold. Many other first world powers have comparable proportions.

Read more: Click Here