Dollar vs gold?

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The price of gold has risen above the $1,900 an ounce mark for the first time on growing concerns about a slowdown in the global economy.

The precious metal rose 0.9% to $1,913.50 an ounce in Asian trade.

Fears of a slowdown in the US and the debt crisis in Europe have spurred demand for gold which is seen as a safe investment in times of uncertainty.

Analysts said demand for gold was also being driven by speculation that the US Federal Reserve may announce new stimulus measures in a bid to boost the economy.

Central bank governors from across the globe are scheduled to gather for their annual meeting at the Jackson Hole summit later this week.

There is growing speculation that Ben Bernanke, the governor of the US central bank, may announce fresh stimulus measures in his speech at the summit.

"The idea for QE2 was conceived during the Jackson Hole summit last year," Ong Yi-Ling of Phillip Futures told the BBC.

"So the markets are hoping similar measures could be announced at this year's speech and that is spurring demand for gold."

Colin Whitehead of Fat Prophets added: "If they push through with more stimulus, gold could rise even further."

He explained that a fresh stimulus package would mean that the US would have to print more money to boost liquidity in the markets, which in turn could see the US currency weaken further.

"The underlying driver of gold prices is the depreciating US dollar value," he said, "so the more money they print, the stronger gold gets."
Libya uncertainty
Oil prices also rose in early Tuesday trading, as fighting continued in Libya, and because of expectations that official figures will show a decline in US crude stockpiles.

Brent was up 33 cents to $108.69 a barrel, while US light crude advanced 62 cents to $85.04.

"It could take months before oil can start to flow again from Libya," said John Vautrain, oil analyst at energy consulting firm Purvin & Gurtz.

"I think there was a lot of euphoria on Monday. But the whole country is not completely pacified yet and we don't have an organised government. A lot is lacking."

Gold Price today 22/08/2011 breaks 1900$

NEW YORK (CNNMoney) -- Gold prices have been on a tear lately, topping a fresh record high above $1,900 an ounce late Monday-- just two weeks after rising above $1,800.

While experts aren't too worried about each new milestones, they are starting to freak out about the rapid speed at which prices are hitting them. Gold started the year just above $1,400 an ounce.

Gold prices rose 2.4% during the regular trading session to settle at $1,891.90 an ounce. In after hours electronic trading, prices topped $1,900 an ounce for the first time.

The gold rush is on

While the "parabolic surge" in the price of gold over the last couple of months is concerning, Lloyd Thomas, professor of economics at Kansas State University, says the rise is also worrisome over a longer period of time.

"Gold is considered a good hedge against inflation," he said, "But the increase in gold price has far outpaced inflation, especially during the last decade."

He noted that inflation has only picked up 2.4% on an annual basis during the last 10 years, but the price of the yellow metal has climbed more than 21% a year during the same time period.


Unless higher inflation -- to the tune of 10% a year -- is forthcoming, Thomas said gold prices are "clearly in a bubble."


But don't expect it to burst right away.

"Bubbles can run a long time -- just look at technology stocks in the late 1990s and housing prices a few years ago," said Thomas, adding that gold prices will likely soon threaten their inflation-adjusted high just above of $2,200 an ounce -- another warning bell of a things getting a little too frothy, he said.


However, some experts like Adam Klopfenstein, senior market strategist at MF Global, argue that they won't worry about a gold bubble until prices surpass their inflation-adjusted high.


As fiscal problems linger, Kingsview Financial's Zeman said gold prices will continue to gain luster, even reaching $5,000 or $7,000 an ounce over the next few years.


"Debt issues in the United States and Europe are playing a huge role in why investors are buying up gold, and those are not going away anytime soon," noted Zeman. "I don't see how the United States can get out of debt without further debasing the dollar, so that will continue to support gold prices."

That said, he's far from in a rush to buy gold at these lofty prices. Zeman is looking for prices to shave between $100 and $200 an ounce in a correction, and said they could drop as low as $1,650 an ounce, the level gold was trading at before its recent run.
But when that might be is anyone's guess.

Silver and Gold prices increase to new record highs

The prices of gold and silver have hit new record highs, driven by a weaker US dollar and continuing tensions in the Middle East and North Africa.

Gold rose as high as $1,518.30 (£918.70) an ounce during morning trading in Europe, before falling back.
Silver briefly reached an all-time high of $49.79 an ounce before retreating to $46.91.
Investors have been buying precious metals as a haven against inflation and recent geopolitical turmoil.
Analysts say gold could even trade even higher.

The dollar could be even weaker, unless there were game-changing comments from Bernanke” Ong Yin Ling Phillip Futures "We as a company believe that we may see $1,600 an ounce by the end of the year," said Angelos Damaskos, a fund manager at Sector Investments, which specialises in gold and oil investments.

"But gold could easily surprise everybody and go to significantly higher levels because of the relatively small supply of the metal."

'Dollar play'


Much of the rise in both metals is seen as the flipside of a decline in the US dollar.
"It's the dollar play," said a Singapore-based dealer, referring to the gold rally. "There is more room for prices to go even higher."

Silver Index  

The greenback has been steadily declining against most other currencies since the end of the financial crisis.

With the US central bank, the Federal Reserve, pumping unprecedented amounts into the financial markets, there are fears the dollar may lose its status as the favourite reserve currency of the world's central banks, with precious metals being an obvious alternative.

On Wednesday, the Fed chairman, Ben Bernanke, is expected to affirm its commitment to quantitative easing, a programme to flood money markets with liquidity.

The prospect of low interest rates in the US is driving investors seeking higher returns towards gold.
"Investors expect the Fed to continue with low rates, which means the dollar could be even weaker, unless there were game-changing comments from Bernanke," said Ong Yin Ling of Phillip Futures.
Investors continue to react nervously to the uncertainty in the Middle East. An escalation in violence in Yemen and Syria over the weekend has also helped the price of gold strengthen.


And in India, demand for gold jewellery has been skyrocketing, rising 69% last year.
In contrast, silver's rally has been driven by its use in industry, particularly in electronics.