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Gold Breaks Record
July 18, 2011
The price of gold surpassed its previous record price on Monday. Gold futures for August delivery soared to $1,607.90 per ounce on new worries over U.S. and European debt. The current rally is the longest in 31 years.
Yan Chen, head of metals and mining for Standard Chartered Equity Research, says gold could reach $5,000 by 2020.
Gold is historically weak during the summer months but the trend was up-ended this year as traders and investors look for safe haven from a global economy wracked by a debt crisis.
Last week Moody’s put the U.S. credit rating on negative watch. In response, investors moved away from the dollar and other paper fiat currencies.
On Monday, Moody’s signaled its disapproval of a plan by Congress to deal with the debt ceiling. The plan, crafted by Sens. Mitch McConnell and Harry Reid, would allow the debt ceiling to be increased, while shifting the political blame for that action from Congress to the White House.
Moody’s said any measure should include substantial spending cuts.
The current move toward higher gold prices began on July 12 following the release of minutes from a June meeting of the Federal Reserve. The minutes revealed the Fed is considering the implementation of QE3 following the failure of QE2.
Investors fear another round of fiat money printing by the central bank will further erode the dollar. They are scrambling to buy gold.
“I think people are coming to realize that the economy is weakening again and the government might see a need to try to stimulate the economy further,” said Joe Foster, portfolio manager for the Van Eck Global International Investors Gold Fund, told CNNMoney.
The record breaking rise came on the heels of bad news in the stock market. The sharp decline in European markets sent U.S. indexes plummeting in pre-market trading. Dow futures were off 82 points to 12,432 and S&P 500 futures dropped 8.4 points to 1,306.1.
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