Gold hit another record high today, marking the tenth record just in the month of August.
The precious metal is driven higher by speculation that the U.S. Federal Reserve may make a decision to introduce a third round of quantitative easing during their meeting at Jackson Hole, Wyoming on Friday.
If Fed Chairman Ben Bernanke does signal in his speech that there will be QE3, dollar will fall and this will drive up gold due to the inverse relationship gold has with the greenback.
In recent years, the yellow metal has benefited from loose U.S. monetary policy which entails quantitative easing, meaning printing more money. Obviously an increase in the supply of money in the system means the value of money, in this case the dollar, falls.
When there is too much money in the system, this could result in rising inflation. Thus the expectation of inflation rising pushes investors to protect their investments in the safe haven gold which is the perfect hedge against inflation.
Spot gold hit an all time high of $1,895.17 by 07:00 GMT. It is one of this year’s best-performing assets, now up 33 percent on the year. After a drop to $1,857 in the U.S. trading session, gold rebounded close to the record high, currently trading at $1,892.