Sunday 24th of January 2021

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Currency Concerns Push Gold Price To Record

The price of gold jumped to a new record after speculation arose that the value of world currencies will fall, which in turn makes precious metals more appealing to the investors concerned about maintaining their wealth.

Gold futures climbed to as much as $1,045 an ounce in New York on Tuesday, beating the previous record of $1,033.90 in March 2008. With the spot price of gold headed for its ninth straight annual gain, the upward movement could bring the longest rally in about 60 years. Also, October gold has been as high as $1,040.20, a record for a near-term contract. Investment demand has offset the lower activity in other areas such as jewelry.

A weaker dollar helped push the price of gold into record territories. The dollar dropped after Australia unexpectedly increased its interest rates. In fact, it declined as much as 0.7 percent against six key currencies. In the United States, the Federal Reserve has maintained the benchmark interest rate between zero and 0.25 percent since the end of 2008.

Gold’s price also has been climbing because of concerns about inflation that could occur whenever the global economy rebounds after all the stimulus efforts from central bankers and governments. President Obama has increased the United States’ marketable debt to a record $6.78 trillion as he borrows money to jumpstart the largest economy on earth. Goldman Sachs Group Inc. estimates the government will sell about $2.9 trillion of debt in a two-year period ending September 2010.

Among other precious metals, silver futures for December delivery jumped 82 cents to $17.355 an ounce on the Commodities Exchange. The metal’s price has climbed 54 percent in 2009. January platinum increased $18.60 to $1,320.40 an ounce, while December palladium spiked $2.70 to $306 an ounce.

The dollar also was at the heart of the news that oil producers as well as France and China plan to stop using it as the currency to purchase and sell oil. The measure would change the pricing of oil into a unit based on a mix of currencies that would include the Japanese yen and a new currency planned for the Gulf emirates as well as the Chinese yuan, according to Tuesday’s Independent newspaper. Central bankers and finance ministers have held meetings to discuss the idea, which U.S. officials know. The move to a new currency could take almost a decade to complete.

With the dire global financial situation, there have been measures indicating the dollar could no longer become the world’s reserve currency. In recent months, Russia, Brazil, India and China have talked about buying each other’s debt as a way to depend less way on U.S. currency. A proposal has even surfaced at the United Nations to create a new global currency to replace the dollar.