Gold tops $1,300 an ounce as dollar slumps

New York: Silver climbed to the highest price since 1980 and gold advanced to a record, topping $1,300 (Dh4,774) an ounce, as the dollar's slump boosted demand for precious metals as alternative assets.

Before yesterday, silver jumped 26 per cent this year, and gold was up 18 per cent, outperforming global equities, Treasuries and most industrial metals. Yesterday, the dollar fell to the lowest level since February against a basket of six major currencies as the Federal Reserve keeps borrowing costs low and moves closer to easing monetary policy to bolster the US economy.

"You've got a lot of open sky for gold," said Michael Guido, the director of hedge-fund sales at Macquarie Bank in New York. "There's no fear of higher rates to come, and the dollar is back to playing defence. Silver hasn't broken any records, so there's going to be more acceleration in the price."

Looking up

Silver futures for December delivery rose 18.7 cents, or 0.9 per cent, to $21.40 an ounce at 10.44am on the Comex in New York. Earlier, the price reached $21.48 an ounce, the highest level for a most-active contract since October 1980.

Gold futures for December delivery gained $2.80, or 0.2 per cent, to $1,299.10 an ounce. The metal climbed to a record $1,301.60.

The Fed kept its benchmark interest rate at zero per cent to 0.25 per cent since December 2008 and purchased mortgage-backed securities and Treasuries to lift the economy.

Last week, Fed policy makers signalled that the central bank may buy more securities and that inflation levels were low, an indication that low borrowing costs will last for an extended period. "With the Federal Reserve saying that they want inflation, that's given people the motivation to buy gold," said Barry James, who manages $2 billion as chief executive officer at James Investment Research Inc in Xenia, Ohio.

Gold reached a record for the sixth time in seven sessions, and investors are looking for a cheaper alternative in silver, analysts said.

"When gold gets to these levels, you're going to see substitution," Guido of Macquarie said. "Silver will also capture a bid off the industrial base."