MercoPress. South Atlantic News Agency

Record for gold on renewed economic recovery optimism

No short term ceiling for the steady rising bullion

The gold rally resumed once more on Wednesday as prices rose more than 15 US dollars an ounce, spurred on by the US dollar’s seemingly endless decline, which continued as renewed optimism over the economic recovery led to dollar selling.

Investors moved away from the greenback in favour of more high risk, higher yielding assets.

As the dollar fell to 15-month lows gold pushed higher setting yet another record and was last changing hands at 1,117, meanwhile longer dated 2010 futures breached 1,120.

Following recent sentiment in the forex and commodity markets it would appear as though the Dollar is suffering from an unusual ‘catch-22’ predicament. Whilst generally maintaining traditional ‘textbook’ reactions to negative economic news, with a weaker dollar following poor consumer confidence data.

Similarly good news also weakens the devalued dollar; the newly created liquidity that’s sloshing around the financial system now seems to flit in and out of forex markets speculatively, undermining any dollar-specific positively gleaned from many improvements to the US economic outlook.

The phenomena is the result of US historically low interest rates, which provide little in terms of speculative appeal compared to higher yielding currencies, commodities or equities following positive economic news.