Thursday, September 23, 2010

Investor moving into gold and bonds 2010?

By The Star

NEW YORK: For lack of a better option, investors are flooding into gold.

Gold prices hit a record high Wednesday, settling at $1,292.10 after a rally that started late Tuesday.

The run-up came after the Federal Reserve indicated it will leave interest rates historically low, and might be open to printing more money to stimulate a weak economy. The news sent the dollar lower, and big investment funds snapped up gold as a safe haven.

"People are questioning where to turn," said Dan Cook, an analyst with IG Markets in Chicago. "As long as there are a lot of concerns on the global economy ... gold can keep going higher."

Gold has been climbing steadily since the financial crisis of 2008, a sign that investors aren't sure where to park their money. While the stock market has been rising in recent weeks, equities are still a volatile investment. And the stalled economic recovery has added to the uncertainty, as central banks and governments consider more stimulus measures that could boost inflation.

Gold cost $718.20 in October 2008, just after the financial crisis, 80 percent below Wednesday's closing price.

The immediate factor behind gold's rise was the Federal Reserve's announcement Tuesday that the bank might again jump in to help the struggling U.S. economy, said William Rhind, strategic director of ETF securities.

The Fed's actions, coupled with more stimulus from other countries, raises the specter of inflation, Rhind said. That makes gold a natural shelter for investors who see a long stretch of weak growth and a sagging dollar.

That means current gold prices could stay around the level of $1,300 for some time to come, Rhind said.

"It's not something that can be changed in the short term. The reason is that with looser monetary policy, and with deteriorating (government) balance sheets, that will lead to inflation pressure," he said.

At the same time, investors are still suspicious of stock markets after a "flash crash" in May wiped out stock values in a matter of minutes, said Cook, the IG Markets analyst. Prices recovered that day, but the causes of the crash are still under investigation.

Other precious metals also rose. Silver December contracts gained 41.5 cents to settle at $21.055 an ounce and copper gained 8.4 cents to settle at $3.5650 a pound.

September platinum gained $20.50 to settle at $1,632.90 a pound while September palladium gained $11.85 to settle at $539.65.

Oil prices slid after the government said stockpiles of oil and gasoline grew last week, even though a major pipeline serving Midwest refineries was shut because of a leak.

Benchmark crude for November delivery lost 26 cents to settle at $74.71 a barrel on the New York Mercantile Exchange.

In other Nymex trading in October contracts, heating oil fell 1.29 cents to settle at $2.1070 a gallon and gasoline lost 1.82 cents to settle at $1.9014 a gallon. Natural gas rose 4.7 cents to settle at $3.966 per 1,000 cubic feet.

In London, Brent crude fell 47 cents to settle at $77.95 a barrel on the ICE Futures exchange. - AP

In view of the uncertainty in US, are investors moving into golds and bonds instead of the stock market in 2010? We see the highest price of gold in 2010 and its gold price going up/ reached peak?