Posted on: Friday 17 August, 2012 6:41
|Gold reaches all-time high, stocks surge
World stocks jumped to a six-month high, gold hit another record, and the dollar weakened on Wednesday on expectations that the Federal Reserve will further loosen monetary policy, boosting risk appetite.
Gold prices reached an all-time high of $1,374.80 an ounce as investors sought protection against a sinking dollar. Other commodities also rose.
Minutes from the Federal Reserve's September meeting on Tuesday showed officials discussed the possibility of buying more longer-term US government debt to drive borrowing costs lower and ways to nudge the public into expecting higher levels of inflation in the future to spur spending.
"The Fed minutes certainly induced a rally right across the board," said Peter Cardillo, chief market economist at Avalon Partners in New York. "We are seeing the dollar lower, gold and oil prices higher. That is adding risk flavor to the market."
Strong corporate results also bolstered stock markets, including dominant chipmaker and Dow component Intel Corp.'s upbeat fourth-quarter sales and margin forecast.
MSCI's benchmark All-Country World equity index rose 1.3 percent on the day to hit its highest level since mid-April.
The Dow Jones Industrial Average rose 119.20 points, or 1.08 percent, to 11,139.60, while the Standard & Poor's 500 Index gained 11.95 points, or 1.02 percent, to 1,181.72. The Nasdaq Composite Index shot up 27.48 points, or 1.14 percent, at 2,445.40.
The FTSEurofirst 300 index of top European shares rose 1.42 percent to close at 1,086.52, a three-week high. The index was boosted by shares of miners such as BHP Billiton, which jumped 4.16 percent.
The prospect of a second round of US quantitative easing, which equates to printing more money, pushed the Australian dollar to its highest level against the US dollar since the Aussie was allowed to float freely in 1983.
The Australian dollar climbed as high as $0.9929, less than 1 cent to parity.
The US dollar also weakened to an eight-month low against the euro.
Dollar losses were limited, however, after the euro failed again to hold above the key psychological $1.40 mark. The dollar's recovery accelerated after automatic buy orders were triggered, traders said.
The euro was up 0.32 percent at $1.3950. It had earlier risen as high as $1.4002 on trading platform EBS — not far from its eight-month high of $1.4030 hit last week.
The dollar also posted losses against a basket of major trading-partner currencies, with the US Dollar Index down 0.30 percent. Against the Japanese yen, the greenback edged up 0.2 percent to 81.92.
Gold hit a record high at $1,374.80 an ounce as the dollar weakened globally. It was trading at $1,370.80 an ounce later, still 1.57 percent higher than Tuesday's close.
Gold prices have rallied nearly 25 percent so far this year as investors turned to the metal as a haven from the effects of an increasingly loose monetary policy in the United States.
"Because we are in a world of quantitative easing in the developed economies, and as QE is almost synonymous with competitive devaluation ... gold and the precious metals (are) taking on the function of an alternative currency," said Ashok Shah, chief investment officer of London & Capital.
US Treasury prices fell on prospects the Fed could buy long-dated bonds in a second round of monetary policy easing.
The benchmark 10-year note slid 11/32 in price, with the yield at 2.481 percent, up from 2.424 percent late on Tuesday.