Broker's Notes: Gold hits record highs as US dollar tumbles to a 10 month low

Gold
Gold prices hit new record highs on Thursday, fuelled by dollar weakness as hopes of more monetary easing by the US Federal Reserve continued to run high, aided by Singapore's move to let its currency appreciate. Silver rose to a fresh 30-year top at $24.38 an ounce, and palladium hit $603, its highest in more than nine years, as the sinking dollar unleashed a broad rally in commodities. Buying interest in gold rebounded from a dip at the end of last week. But holdings in the SPDR Gold Trust slipped more than two tonnes to 1,285.200 tonnes by Oct 13, their lowest in more than two months.

US dollar
The U.S. dollar tumbled to a 10-month low on Thursday after Singapore unexpectedly tightened policy to let its currency rise, lifting Asian stocks and copper to two-year peaks and gold to a record high. Singapore's monetary authority tightened policy, which it manages through a secret band in which its currency is allowed to trade. The news prompted the U.S. dollar to fall broadly, pushing up the euro to an eight-month high around $1.4083. With the next Federal Reserve policy meeting, at which the central bank may announce more asset buying with newly printed dollars, and the next meeting of G20 officials still weeks away, the well-worn trade of selling dollars to buy emerging market stocks, commodities and longer-term bonds was still in play.

In a sign that market conviction on quantitative easing is entrenched, participants shruged off comments from Richmond Federal Reserve Bank President Jeffrey Lacker that he would not support more easing if economic conditions remain as they are. Lacker, generally seen as a policy hawk and not a voter on the FOMC this year, has been suspicious of unorthodox policies and many market players think Fed chief Ben Bernanke is determined to act now to shore up the U.S. economy.

Australian dollar versus the US dollar:
The dollar's decline against a basket of major currencies pushed Australian dollar to near parity against the dollar and this underlined global currency tensions that have sparked a war of words among policymakers. The Australian dollar was at US$0.9970 up 0.7 percent on the day and within sight of parity, something not seen since 1982. Australia's currency, which has benefited from having relatively high yields among G10 currencies, has risen 9.3 percent since September. Some resistance is expected at $1.000, where option barriers are said to lie.

Yen
The dollar also fell 0.6 percent against the Japanese yen to hit a fresh 15-year low of 81.28 yen, despite constant wariness about Japanese intervention, edging closer to its record low of 79.75 hit in April 1995. While traders think Japan could intervene to keep the yen in check at any moment, some market participants speculated that Tokyo may prefer to avoid intervention ahead of G20 meetings.

Indian rupee
The Indian rupee strengthened on Thursday in tandem with Asian peers and supported by firm stocks, and traders said it could breach 44 to the dollar for the first time in more than two years. Record foreign buying of domestic stocks has been the main driver for the rupee, and the inflow is expected to rise when Coal India opens a $3.5 billion IPO next week. Broadly, however, the rupee is seen moving in 44.15-44.35 band. The Reserve Bank of India is reluctant to intervene in currency markets but may be forced to in coming weeks as foreign investors pour in billions of dollars to buy shares in the country's largest ever IPO.

Source: Richcomm Global Services, DMCC, Dubai