Gold prices edge towards record highs

Gold prices edge towards all-time highs as the external environment remains supportive.

Prices settled mostly unchanged across the complex yesterday. Gold prices tested intraday highs of $1557.75/oz before closing unchanged on the day at $1545.8/oz following the FOMC statement, the dollar strengthening against the euro and equity markets weakening.

“Our economists note the Fed sees a modest recovery in place and believes the factors that have held growth recently will wane but inflation risks have moved higher. The statement also confirmed our economists’ view that the bar to any potential “QE3″ is quite high,” says a note from Barclays Capital.

Although speculation over further quantitative easing had lent some support to gold prices, the low interest rate environment coupled with continued macro uncertainty remains favourable for gold.

Gold prices remain well supported despite the seasonal weakness in demand.

ETP holdings were mostly flat on the day with flows for the month up just over 7 tonnes and total metal held in trust is over 2100 tonnes.

Silver prices continued to hover above $36/oz following an inflow of 24 tonnes across the physical ETPs; however, flows for the month are still down over 300 tonnes.

The PGMs remain caught between demand side downgrades and potential supply side disruptions.

In South Africa, the National Union of Mineworkers increased their initial wage hike demands following the first offer from producers.

Labour costs make up around half of the operating cost of platinum mines, and in the last round of negotiations settlements were above the rate of inflation. The producers have suffered from high costs despite PGM prices rising.

Source: http://www.economy-news.co.uk/gold-prices-23201106.html

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