Results tagged “inflation” from Capital Gold Group, Inc.

DOW LOWEST IN 21 MONTHS

Gold for August delivery settled at $32.80 to 915.10 an ounce on the New York Mercantile Exchange. The precious metal hit an all-time intraday high of more than $1,030 an ounce back in mid-March.

"Weakness in the dollar has helped propel gold sharply higher today," said James Steel, an HSBC metals analyst in New York.

In addition to the dollar's decline, gold was supported by a surge in the price of oil and signs that the credit crisis is alive and well on Wall Street.

"I think the bottom is rather limited, given the dollar and credit concerns, plus high oil prices," he said.

Dollar weakness The dollar lost ground against the euro Thursday after the U.S. government reported that the nation's economy grew at a sluggish rate of 1% during the first quarter.

The euro rose to buy $1.5736 in afternoon trading, up from $1.5667 late Wednesday.

The greenback's weakness also stems from the Federal Reserve's decision Wednesday to hold interest rates steady at 2% as the central bank struggles to deal with a flattening economy coupled with rising prices.

The Fed's decision "signaled that inflation in near term is still uncertain," Steel said. That can drive gold prices higher because many investors see precious metals as a hedge against inflation.

Oil jumps T

The dollar's decline helped boost oil prices Thursday. Reports that Libya may cut oil production and that an OPEC official said crude could hit $170 a barrel this summer gave crude prices additional support.

Light, sweet crude for August delivery rose $3.65 to $138.20 a barrel on the New York Mercantile Exchange. The price climbed as high as $138.95 - a $4.40 gain and within $1 of the all-time intraday high of $139.89 - earlier in the session.

"To some extent, the gold market takes its cues from oil," Steel said. When oil rallies, gold tends to follow suit because oil is such a large component of commodities indices, he said.

Stocks swoon

Wall Street was battered Thursday afternoon, with the Dow industrials hitting its lowest intraday level in 21 months. The selloff was prompted by downgrades in the financial sector, the resurgence of credit concerns and the fallout from disappointing quarterly reports in the tech sector.

Gold often rallies when the stock market is in decline. "It is a traditional safe haven in periods of financial stress," Steel said.

Stocks came under pressure after Goldman Sachs cut its ratings on U.S. investment banks to "neutral'' from "attractive" because of continued deterioration of the banking industry and the prospect of a lengthy recovery. It also added Citigroup to its "conviction sell'' list.

Meanwhile, the stock market is digesting corporate results released late Wednesday from tech leaders Oracle and Research In Motion.

Oracle (ORCL, Fortune 500) easily beat Wall Street expectations for its fiscal fourth quarter results but the software maker gave more conservative guidance that disappointed investors.

BlackBerry maker Research in Motion (RIMM) missed its target and guided down its profit forecast for the quarter.

Capital Gold Group, gold group, gold, gold prices, gold news, gold coins, gold bullion, gold IRA, IRA gold

"Dollar is going to get slammed again." 

June 26 (Bloomberg) -- Gold surged the most in 16 months on speculation the Federal Reserve won't rush to raise borrowing costs to curb inflation. Silver jumped the most since March.

The Fed yesterday kept its benchmark interest rate at 2 percent, even as policy makers acknowledged heightening inflationary expectations. An OPEC official said crude oil may reach $170 a barrel soon. Gold reached an all-time high of $1,033.90 an ounce in March as fuel, corn and other commodities soared and the dollar fell to a record against the euro.

``The Fed said that inflation is a major concern, but they're not going to do anything about it, which made gold go ballistic,'' said Leonard Kaplan, president of Prospector Asset Management in Evanston, Illinois. ``The dollar is going to get slammed again.''

Gold futures for August delivery jumped $31.10, or 3.5 percent, to $913.40 an ounce at 12:18 p.m. on the Comex division of the New York Mercantile Exchange. A close at that price would mark the biggest percentage gain for a most-active contract since Feb. 21, 2007.

Silver futures for September delivery soared 75.3 cents, or 4.5 percent, to $17.36 an ounce. A close at that price would mark the biggest increase since March 5.

Before today, silver advanced 11 percent this year, while gold climbed 5.3 percent.

Traders trimmed bets on a rate increase in the next three months after the Fed's announcement yesterday. Interest-rate futures show a 26 percent chance the Fed will keep borrowing costs at 2 percent in September, compared with a 2 percent chance a week ago.

Iran Tensions

Chakib Khelil, Algeria's oil minister and the president of the Organization of Petroleum Exporting Countries, said in an interview on France 24 television that a conflict involving Iran might push oil prices over $200 and as high as $400.

Oil rose as much as 3.3 percent today to $138.95. The record was $139.89 on June 16. Iran has the second-biggest proved oil reserves and is OPEC's second-largest producer.

``Gold rose on the comments from OPEC,'' said Narayan Gopalakrishnan, a trader at MKS Finance, one of Switzerland's four bullion refiners.

Investors traditionally buy gold to hedge against a loss of purchasing power. Gold rallied 39 percent from Sept. 17 to March 17 as the Fed slashed rates from 5.25 percent after a housing slump and credit crisis threatened to push the U.S. economy into recession.

Analysts say the economy is too feeble for the Fed to raise rates any time soon. The U.S. gross domestic product expanded at an annual rate of 1 percent in the first quarter, capping the weakest six months of growth in five years.

Commodity Rally

The Reuters/Jefferies CRB Index of 19 raw materials rose to a record today and has gained 29 percent this year. In May, U.S. consumer costs climbed at an annual rate of 4.2 percent and wholesale prices rose 7.2 percent, according to data from the Labor Department.

``The Fed seems to have decided to protect growth by holding rates low and to accept the fact that this period of inflation is inevitable and unstoppable,'' said Patrick Chidley, an analyst at Barnard Jacobs Mellet in Stamford, Connecticut. ``Inflation is the lesser of two evils. Investors will increase their positions in gold, and it's likely to continue upward.''

The Fed has been more aggressive in cutting rates and slower to raise borrowing costs than other central banks, eroding the value of the dollar, analysts said.

`Major Problem'

``The Fed's decision to not fight inflation is having a direct impact on gold prices along with many other commodities,'' said Tom Hartmann, an analyst at Altavista Worldwide Trading Inc. in Mission Viejo, California. ``Interest rates will not rise, though that would be a quick way to combat high commodity prices. The Europeans and other central banks seem keenly aware that inflation is a major problem.''

The European Central Bank has held its benchmark rate unchanged at 4 percent since June 2007. The Bank of England's key lending rate is at 5 percent.

Russia's oil funds may invest in gold, Moscow-based agency RIA Novosti said, citing a finance ministry official. Russia's Reserve Fund and the National Wellbeing Fund were worth a combined $161.9 billion on June 1. . . .

Capital Gold Group, gold group, gold, gold prices, gold news, gold coins, gold bullion, gold IRA, IRA gold