By Russell Glaser – Gold continues to consistently rise above its record prices from the previous weeks as a slumping dollar has boosted prices for the commodity. Trading during today’s Japanese session pushed the EUR/USD up as the pair is closing in on the psychologically important 1.5000 mark. An explanation for the dramatic rising price may also be reasons for the prices to continue their upward trend.
The price of spot gold increased as the dollar fell against both the euro and the yen today. During the afternoon trading session in Japan, the dollar was trading at a daily high of 1.4992 against the euro while falling to a low against the yen at 89.40.
During this time spot gold touched a new record high of $1132.07. Last week’s trading had the commodity climbing over 2%. Pushing the commodity higher is a weak dollar, fears of higher future inflation, and the large purchases of gold bullion by central banks.
The EUR/USD is up 1.8% this month as risk aversion is dissipating in the financial markets and traders are seen as being bullish on an economic recovery. However, due to the continued dovish monetary policy by the leading central banks in the world, fears remain of higher inflation. The lack of interest rate tightening and the scaling back of programs designed to inject liquidity into the financial markets make gold an attractive investment. Gold is typically known as a hedge against inflation.
Also the purchase of 200 tons by the Reserve Bank of India from the IMF at the beginning of the month has highlighted not only traders appetite for the commodity, but also the major institutional economic powers who feel gold may be a good investment and a way to diversify their holdings away from the dollar.
The major trend that began more than one year ago has continued at an unbridled pace. Despite the news reels and highlights the commodity has received in the press, spot gold trading has not shown signs yet of a correction in the price.
Forex Market Analysis provided by Forex Yard.
© 2006 by FxYard Ltd
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