By: The Telegraph, April 7, 2011
Inflationary concerns and conflict in Arab world send silver to heights unseen since 1980
Gold prices hit a new nominal high of $1,462.93 on Wednesday, setting a record for a second-consecutive day on inflation fears and a falling US dollar.
Concerns over the continuing turmoil in the Middle East and North Africa also boosted safe haven demand for precious metals, with the silver price rising to a 31-year high of $39.77 an ounce. The price was last at this level in January 1980, when the global economy was in turmoil following the 1979 oil crisis.
After hitting new highs, the gold price closed in London at $1,462.93, up $26, while silver ended the day up $1.21 at $39.71.
The dollar weakened against major crosses, making precious metals cheaper in other currencies. An imminent interest rate increase in the world’s largest economy is looking less likely after Dennis Lockhart, president of the Atlanta Fed, said the US economy was too fragile for such a move at present. Tuesday’s minutes of the Federal Reserve Open Markets Committee also supported this view.
Today the European Central Bank is expected to raise interest rates, making the euro more attractive to foreign investors and raising the prospect of further weakening of the dollar. On Wednesday, the dollar fell to a 14-month low against the single European currency.
Meanwhile, fears over inflationary pressures around the world are building. This boosts demand for gold as some investors see the metal as protection from rising prices.
China raised its interest rates earlier this week as it tries to cool its fast-growing economy. “The reality of accelerating inflation in China is indeed positive for gold,” Edel Tully, an analyst at investment bank UBS, said.
