The prices of various metals continue to rise as the dollar falls deeper into the abyss. Well now, if this isn’t a clear sign of massive inflationary pressures, then I don’t know what is. Some experts say the United States economy could even be facing a potential stagflation – that dreaded bogeyman that haunts economists in their darkest dreams.
A tumbling dollar and strong oil prices prompted investors and speculators to buy gold heavily on Tuesday, with the metal hitting a 28-year high and trading about $30 below its record peak.
Platinum advanced to an all-time high of $1,466 an ounce, while silver surged to $15.09, its highest level in 18 months and targeted a 25-year peak of $15.17 hit in May 2006.
High prices sparked sales of gold scrap from Indonesia and Thailand to Singapore, a key centre for bullion trading in Southeast Asia. Physical buyers remained nervous in India, the world’s top gold consumer, ahead of a key festival this week. Spot gold hit a high of $821.30 an ounce, its best level since January 1980 when it set a lifetime high of $850. It was at $820.15/820.85 against $808.80/809.60 late in New York on Monday.
Gold also surged in some other currencies, with the metal quoted in sterling hitting a record high of 391.42 sterling per ounce. It traded at 561.74 euros, just below last year’s all-time high of 569.90 euros.
In other markets, the benchmark contract in Tokyo gold futures rose above the closely watched 3,000 yen per gram level for the first time since July 1984. The most active December US gold contract added $10.8 an ounce to $821.4. Silver was at $15.09/15.13 an ounce from $14.64/14.69 on Monday. Platinum was $1,466/1,471, against $1,459/1,463. Palladium rose $4 to $375/380.
Copper prices bounce: Copper prices bounced on Tuesday but analysts said the metal, used in power and construction, was likely to come under pressure from higher stocks and supplies, as well as falling demand.
Aluminium touched a three-month high and tin hit record highs on growing concerns about supplies. Higher base metal prices and stronger sentiment on equity markets boosted London-listed mining shares such as BHP Billiton , Xstrata and Rio Tinto, which were all up more than 3 percent.
Copper stocks in LME warehouses at around 168,000 tonnes are at their highest since mid April. They are up nearly 30 percent since late September. More physical material also means the cash price is at a $3 discount to the three-month contract.
Aluminium gained to $2,638 a tonne, the highest since August 9 and traded at $2,634 from Monday’s $2,610. Tin hit a record high of $17,100 a tonne on worries about supplies from Indonesia, the world’s second biggest producer after China. It was quoted at $16,950/17,000 from Monday’s last quote at $16,725/16,775.
Nickel was at $31,885/31,890 from $31,600 on Monday, lead was at $3,740/3,750 from $3,695 and zinc was at $2,769/2,770 from $2,725.
Now I think we need to take a break and reflect upon what these numbers are trying to tell us. Did all these metals become more scarce all of a sudden? No, what is clearly happening is that dollar are becoming a lot more abundant. There is no doubt in my mind that precious metals act as an economic health diagnostic tool. When the prices of precious metals relative to national currency are high, then the economy is undoubtedly in a “sick” state. The majority of these financial maladies come as a result of massive money supply inflation carried out by central banks – like the Federal Reserve for example.
That does it for my two gold-backed cents. Cheers everyone, and happy investing.
Sleep tight, and don’t let The Fed Bugs bite! ;)