As reflected in earlier blog entries: Commodities will rise. And sure enough, Gold rose for a third day on Wednesday to hit record highs after the Federal Reserve signaled it stood ready to inject fresh Cash into the economy, knocking the dollar off. Spot gold hit record of $1294.95 an ounce.
And Silver edged closer to its highest in 30 years, against a backdrop of investors seeking cheaper safe-haven assets, which was reflected in the largest one-day inflow of metal into the iShares Silver Trust in 10 months.
The announcement for QE2 (to inject liquidity) is not new. It meant a desperate move to contain the economic drag, now ballooning into a black hole, and showed further unease on the government's side on what they will do to weaken their currencies further to support flagging economic growth. An inflation will erode the returns from currency, equity and bond holdings yet benefit owners of The Safe Havern.
Gold has risen by over 17 percent this year. But large investor positions in gold, as reflected by holdings of metal under the SPDR Gold Trust, the world's largest exchange-traded fund, and open interest in U.S. futures puts gold at the risk of a downward correction.
Some people felt that the market is over-extended since gold has risen by over 17 percent.
On the other hand, Silver prices broke above $21.00 an ounce to their highest since March 2008 and remained within a hair's breadth of highs not seen since October 1980. Holdings in the iShares Silver Trust jumped 127.81 tonnes, the biggest gain in nearly 10 months, to 9,509.55 tonnes. Spot silver was last at $21.04, up 0.5 percent on the day, and set for a rise of 9.1 percent in September, its largest monthly gain since November 2009.
Spot palladium rose nearly 2 percent to $537.55 an ounce. The price hit a near 4-month high of $563 on September 15, while platinum was up 0.5 percent at $1,629.00.
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