Gold flirted with and around UD$1,000 oz for more than a month, and yesterday Gold futures on the COMEX Division of the New York Mercantile Exchange rallied to a record high Tuesday, as the USD headed South to a 1 yr low on a Bearish report. The price for the most active Gold contract (December delivery) soared US$21.90, or 2.2%, to close the session at US$1039.70 oz. after taping US$1,045 shortly before the close, topping the overhead resistance of US$1,033.90 made in March 2008. After the Istanbul G-7 meeting failed to give enough support to a weak USD, the greenback headed due South Tuesday. It was reported in Great Britain that Crude Oil exporting countries in the Middle East plus some big energy consumers are considering ending the benchmark US$ in global Crude Oil trading replacing it with a basket of currencies, including the Japanese yen, Chinese Yuan, the Euro and Gold. This report was denied by officials from the related countries, however, the damage was don and the greenback tumbled under the pressure as investors flocked to Gold to hedge. By the end of Gold floor trading session, the dollar index, a gauge measuring the greenback’s value against a basket of major currencies, dropped 0.344 to 76.274 from 76.618 on late Monday. Gold will see a new record level as long as the USD is softkeeps soft in the future, and in the long run investor’s concerns about inflation are a important element helping Gold climb higher and higher, for Gold is a good asset against rising commodity price. During the financial crisis, U.S. government pumped a huge amount of liquidation into the markets in order to stimulate the economy. This provided a potential environment for inflation especially the interest rate keeps at a record low level. In an environment where interest rates are virtually zero, the incremental cost of moving into Gold is nil. It stands to reason for investors that Gold is more desirable. Inflation worries are also fueled by the rising energy prices. In the past several sessions, the benchmark oil contract for November delivery rose more than US$5 and closed above US$70 bbl. Some of the big traders said they were seeing rising demand in India, the largest consumer of Gold in 2008, ahead of the Diwalifestival on Oct. 19 which always results in a large consumer demand for Gold. Buoyed by Gold’s new record high, December Silver surged 76 cents to at US$17.295 oz and January Platinum rose US$23.50 to close at US$1,325.30 oz. Paul A. Ebeling, Jnr. www.livetradingnews.com
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