Forex: Gold reaches a fresh all time high

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Gold prices rallied to a new record high on Thursday for a fifth straight session as the dollar index tumbled for a third day toward an all-time low, prompting investors to buy the precious metal as a currency hedge.

 

Gold prices and the US Dollar traditionally have an inverse relationship. The greenback fell broadly as record low interest rates and rising concerns for the huge U.S. budget deficit pushed the Dollar closer to an all-time low against major currencies. The decline began on Monday after Standard and Poor’s threatened to cut its long-term rating on U.S. Treasury debt if the government cannot find a way to reduce its massive debt. Economic stability throughout the world is threatened if a deal is not reached soon. This is the perfect recipe for gold rally.

 

“The U.S. dollar is in the midst of a severe downtrend. So the dollar is not the safe haven in view of the difficulty the U.S. government is having in resolving its budget deficit, and gold is benefiting from that,” commented Leo Larkin, metals equity analyst at Standard & Poor’s.

 

Spot gold peaked at the record high of USD1,508.95 an ounce by 1100 GMT on Thursday. It opened the Asian session slightly lower at 1504.83 and traded close to that level.