Amidst continuing speculation that central bankers will shortly take action to advance a monetary stimulus, gold on Tuesday broke $1,700 for the first time since March. Both U.S. and European manufacturing and markets were slow to pick up during August, leading to increased worries that a third-quarter recession may be inevitable.
“Bad economic news is good for gold,” Pratik Sharma, a fund manager at Miami-based Atyant Capital, said in a telephone interview. “People are getting additional confirmation that central banks are ready to unleash more stimulus measures.”
Gold futures for December delivery shot up yesterday to $1,701.60 before settling at $1,696.40 at 10:30AM on the Comex in New York. At the end of August, Fed Chairman Ben Bernanke declared that the central bank would provide further stimulus if it was deemed necessary.
The ECB for its part also reiterated its commitment to stimulus action as necessary, and the next meeting on September 6 is expected to throw light on plans to buy bonds from several debt-ridden nations.
From December 2008 until June 2011, bullion soared 70 percent. This was due in large part to the Fed suppressing borrowing costs at record low levels while buying up $2.3 trillion in debt over two rounds of quantitative easing.
Silver futures for December delivery also rose to peak at $32.375 an ounce, later settling at $32.085 on the Comex.