Gold Sharply Higher
June 26th, 2008Via: Market Watch:
Gold futures rallied to a one-month high on Thursday boosted by weakness in the U.S. dollar, as other metals futures also posted strong gains.
Gold for August delivery rose $29.70 to $912 an ounce on the New York Mercantile Exchange.
The precious metal earlier hit an intraday high of $914.50 an ounce, its highest level since late May.
On Wednesday, gold futures moved higher in electronic trading after the Federal Reserve kept interest rates unchanged but said that upside risks to inflation have increased.
Gold prices had closed regular trading with a loss of 1%, tracking weakness in the oil market ahead of the Fed decision, which came shortly after metals trading on the Nymex ended.
“There is the risk that while the Federal Reserve has to an extent ‘talked the talk’ regarding inflation, it is failing to ‘walk the walk’ by raising interest rates in order to combat the real threat posed by surging inflation,” wrote Mark O’Byrne, executive director of Gold and Silver Investments Ltd., in a research note.
Inflation in the U.S. remains higher than interest rates and continuing negative real interest rates could lead to an “inflationary spiral,” he said.
That “will likely lead to sharply increased investment demand for gold to hedge against burgeoning stagflation,” O’Byrne said.
