Gold prices settled at new highs Tuesday amid global currency problems and the dollar’s depreciation. The weaker dollar had created a favorable condition for gold to set new highs.
The rally of gold prices was driven partly by investors’ rush into the safe-haven asset. Gold for December delivery surged to $ 1,340.30 an ounce at the Comex division of the New York Mercantile Exchange.
The U.S. dollar index fell to $ 77.75 while the euro rose to $ 1.38 vs the dollar, up 1.16%. Data and announcements highlighted the weakness of global currencies and governments’ health.
In Asia, Australia kept its interest rate stand still while Japan announced its reduction in interest rates and pledge to purchase assets. The Bank of Japan lowered its key rate to a range of between zero and 0.1 percent and announced additional easing measures to revitalize the recovery.
The bank might create a $ 60-million fund to purchase assets like commercial papers, exchange traded funds, corporate bonds, and government bonds, hoping devalue its currency after its rally to a 15-year high earlier this year. In Europe, the European Central Bank and the Bank of England will be in focus.
Both banks are not expected to announce a change in rates. The Bank of England is projected to restart its quantitative-easing program. Ireland\’s Aa2 debt rating was being put under review for a downgrade.
The U.S. Federal Reserve is said to buy more government debt to revive the economy. Chairman Ben Bernanke said the further purchases enabled to ease financial condition, defending the Fed’s $ 1.7 trillion asset purchase program. However, it is uncertain that another round of quantitative easing will be a smaller and longer round of purchases or large-scale, short-term program.
All global data and announcements were attributed to the rally of gold prices.
On Wednesday afternoon, spot gold prices still maintained their positive price action as the U.S. dollar exhibited vulnerability. The U.S. dollar index fell 0.5% to $ 77.42. New York spot gold prices were surging 0.6% to $ 1,348.60 an ounce.