IBT: Gold and silver prices benefiting from loose monetary policies
The US dollar declined to a 16-month low against the euro yesterday, with the EUR/USD reaching an intraday high of $1.4882. In spite of Europe´s sovereign debt crisis, investors are favouring the euro over the dollar owing to US Federal Reserve chairman Ben Bernanke’s remarks that the Fed will be keeping interest rates at a record-low level of almost 0%, with no rate rise imminent.
Market observers see nothing to indicate that the Fed will raise its Federal Funds Rate in the foreseeable future. Some high-ranking Fed officials have called for an end to ultra-loose monetary policies, but these hawks are in a distinct minority. This is causing the prices of precious metals to increase – particularly gold and silver. Further declines in the dollar will encourage more investors to buy gold and silver.
India´s gold price also reached a new all-time high at 22,470 rupees per 10 grams in yesterday´s trading session. Traders said that Indian demand for precious metals is picking up because the Akshaya Tritiya festival is due to start on May 6. Gold and silver will be in hot demand from Indians over this period, since they often give precious metals to relatives and friends in the course of their festivities. For this reason gold and jewellery traders were currently stocking up their warehouses. The rupee silver price reached a new all time high at 74,300 rupees per kilogram at the beginning of this week; yesterday the white metal was trading at 72,000 rupees per kilogram in Mumbai.
The World Gold Council (WGC) disclosed yesterday that gold recycling increased in the last seven quarters. The supply of recycled gold rose to 475 tons in the fourth quarter of 2010 and reached its second highest level in the last five years. In India the amount of recycled gold totaled 14 tons in 2010. Gold recycling, in addition to melting scrap gold, will satisfy about 30% of Indian gold demand, though the country’s supply of scrap gold has recently decreased since investors and other buyers are expecting further gold price rises. It’s estimated that 1,653 tons of gold were recycled in the year 2010 – a decline of about 1.2% in comparison with the previous year.
According to the WGC the global gold supply stood at 4,108 tons in 2010 – an increase of 2% in comparison with 2009. Significantly for the gold market, central banks are now starting to act as net buyers.
