subject: Gold Hits New All Time High [print this page] In the commodities markets, Gold has again reached an all time high of $1,274.95 per troy ounce. It may only be a temporary shift, however the equities markets are looking increasingly strong. It is possible that this shift is only a temporary one as heightened economic uncertainty and quantitative easing speculation has encouraged financial spread betting investors to increase their exposure to gold.
The precious metal has also been helped by the fact that the US dollar has seen broad declines and could depreciate further if the US Federal Reserve announces another round of quantitative easing.
If the next meeting at the Federal Reserve comes with a pro-quantitative easing stance that could provide further impetus for an increase in the price of gold. It is worth noting that Goldman Sachs chief US economist Jan Hatzius reported that further quantitative easing could be initiated as early as November 2010.
However its not just in the USA where the metal is seeing upwards pressure. After the Japanese government recently intervened to weaken the yen, Japanese investors may also continue to seek shelter in gold on fears that further intervention may be on the cards. The precious metal is also often positioned as a good hedge against inflation, and with inflation in the UK stuck around that 3%, there could also be an influx of UK investors buying more bullion.
According to David Choe of IG Index, The bullish sentiment was echoed by precious metals researcher GFMS. They have not ruled out the possibility of gold rising to $1,350 in 2010 as investment demand outstrips that of jewellery.
Notwithstanding this, demand for bullion from the jewellery market is also expected to remain high for the remainder of 2010. The end-of-year-gift-giving ahead of various religious festivities should prop up demand.
Its also interesting to note that we have just seen the last major gold miner close out their gold hedging positions. The company in question, AngloGold Ashanti, has announced that it plans to raise circa $1.5bn in order to close out its hedging contracts. The hedging has been a major burden for the firm: it locked in the price it received for gold at around $450 an ounce. A price not seen in the gold spread trading market since September 2005.
The release of this burden will let AngloGold benefit from future price increases. Investors could read this as a bullish signal, as it would suggest that the miner is confident that gold prices will rise further.
Having said that, AngloGolds latest move could also be considered a bearish if you take the view that the firm is closing its previous hedge contracts in order to enter a new hedge at current prices due to a belief that the market has peaked. However, this theory seems less likely given that the fundamentals which are driving gold prices remain intact.
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