Gold hit a record high above $1,000 (U.S.) an ounce on Thursday and oil reached an all-time peak over $110 a barrel as a historically weak dollar and falling equities triggered a flight to commodity markets.
Soft commodities such as cocoa and coffee also rallied and industrial metals rose but were restrained by fears of a global economic slowdown.
The dollar sank to a 12-year low, and an all-time low versus the euro, while share markets lost ground as the investors fretted over the health of the U.S. economy and global financial sector.
U.S. gold futures rallied to a $1,000 an ounce while spot gold jumped to a fresh peak of $997.50 an ounce and was at 997.10 an ounce just after noon in London, up more than 2 per cent from $981.90/982.70 an ounce in New York on Wednesday.
“The environment of other asset classes has made commodities very attractive,” said Michael Lewis, global head of commodities at Deutsche Bank.
“They look very much like a safe-haven, because if you look at other asset classes there is a lot of risk associated with equities, carry trades and so on.”
Fears of a recession and expectations of aggressive rate cuts from the U.S. Federal Reserve to help shield the U.S. economy is piling pressure on dollar, while also boosting gold and oil as alternative investments.
I remember a couple years ago watching The Nightly Business Report and the analyst said gold would hit $1000. I regret not buying the stock I wanted to in gold!
There are many factors influencing the price of gold, and a lot of speculation.
This recent article lays out the factors pretty well -
How Low Will Gold Go?
Quote:
By Alex Wallenwein
Aug 18 2008 11:02AM
That's a silly question.
Gold doesn't go anywhere. What "goes" up or down are the dollar figures we have all been trained to attach to it - but we all know, for a fact, how illusory those are. (If you really insist on an answer to the question, I would have to say: "The lower, the better!")
Today, a "dollar" is primarily an accounting unit. Nothing more than a concept, an idea - and a very fleeting one at that. It is created just like that, and it can be destroyed just like that, and it's the same thing with all other fiat currencies.
Currencies are pure legal fictions. They are treated by the law as property, but just like corporations aren't really "persons," they are not really property themselves.
Today, it is literally impossible for you to hold "a dollar" in your hand. All you can hold is either a piece of paper that says it is a federal reserve note and that carries the legend "dollar" next to a number imprinted on it, or you can hold a piece of gold or silver in your hand that states it is "worth" so-and-so many dollars - and you KNOW that the number is way off.
In times like these, the accounting unit, i.e., the mental concept of what an ounce of gold is "worth" to most people (and at which price they are willing to exchange it for something else) is said to be less than 800 of those ideas, those afterthoughts, we call "dollars."
So what? Who cares?
At this point, one of the largest dealers in American Silver Eagles coins is sold out, there is talk of rushes on precious metals dealers in London, and in Saigon, Vietnam, several access roads to large gold dealers experienced traffic jams, all from retail investors. Yet, the rigged COMEX-generated "price" of gold and silver is falling.
Jim Turk of GoldMoney reports (click on 'Founder's Commentary) that there still is no shortage of large LBMA bars of gold and silver, but that may not last long. What does that tell you?
The actual price of gold is far higher than the illusion the major exchanges create for you.
So much for the non-existent tangible property aspect of what a "dollar" is. Now, let's go back to the collective price-illusion we attach to gold. Our real question is: "How low can the illusory price of gold go while there are serious supply bottlenecks that are popping up all over the place?
The price-illusion of gold and other metals (let's call it the "i-price" for brevity's sake) is manufactured mainly at the New York Commodities Exchange. There, willing trader-sheep are presenting themselves for their voluntary fleecing every day. They place bets on the i-price of gold while knowing full well that, if worse comes to worst and their winning bets cannot be filled one day, they have to go to court for a dollar-settlement on their claim. I wonder what a dollar will be worth relative to real goods and services in those days?
The only reason the i-price of gold is falling is this fact - that virtually nobody takes delivery of the gold they contract for at the exchange. If everyone took delivery on their contract at expiration, there would not be any gold left to play with. The i-price of gold would have to rise to a multiple of what it is today, until it coincides with the "a-price" - the actual price that normal laws of supply and demand would dictate.
To keep a potentially endless article very short, the answer to the question of "how low will gold go?" is a thundering "IT DOESN'T MATTER. GO GET YOURSELF SOME - NOW!"
It absolutely matters not how low the price goes. You are lucky if you can find any gold or silver at these prices, so if you can find some, buy it. The lower it goes, the better for you.
Now, since large bars are still available, would it not make sense to buy some while they are, at these incredible i-prices? I think it would.
Sooner or later, even the mutual fund managers who buy and sell contracts instead of storing metal will figure this out. Until then, happy buying!
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03-13-2008, 12:40 PM
Gold Hits $1,000 an Ounce
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