Gold hits new highs
November 11, 2009
By Walter Brandimarte
New York - Global stocks and commodity prices rose on Wednesday after news of a jump in Chinese factory output and dovish comments by US Federal Reserve officials encouraged investors to take on risk.
Oil prices rose while gold tested new highs near $1 120 per ounce as the US dollar initially slid to 15-month lows. The greenback erased its losses later, however, after failing to break below key technical levels.
US bond markets did not operate in observance of Veterans Day.
A string of speeches on Tuesday by officials of the Fed - the US central bank - reinforced the view that US interest rates will remain near zero for the foreseeable future, increasing the appeal of higher-yielding assets.
"Investors were waiting to see when all the stimulus would be withdrawn and what would happen then. Now, they think stimulus won't be withdrawn for a lot longer than they used to," said Michael Pento, senior market strategist at Boston-based Delta Global Advisors.
Optimism about a global economic recovery also grew after China said industrial production jumped 16.1 percent in the year to October, the fastest pace since March 2008.
"In addition to the economic data showing that things are getting better you also have seemingly all the policy makers in the world on a co-ordinated basis trying to keep this recovery going," said Eric Kuby, chief investment officer at North Star Investment Management Corp in Chicago.
MSCI's all-country world stock index rose nearly 0.51 percent.
The Dow Jones industrial average ended up 44.29 points, or 0.43 percent, at 10,291.26, while the Standard & Poor's 500 Index rose 5.50 points, or 0.50 percent, to 1,098.51. The Nasdaq Composite Index gained 15.82 points, or 0.74 percent, at 2,166.90.
The FTSEurofirst 300 index of top European shares rose 0.4 percent to its highest close since October 22, supported by bank shares.
Emerging market stocks were 0.91 percent higher, according to a benchmark MSCI index.
Commodity prices also rose, with US crude oil prices ending up 0.29 percent at $79.28 per barrel. Spot gold prices gained 1.14 percent to $1,117.70 an ounce, after hitting a high of $1,118.35 earlier in the session.
Gold prices are poised to rise further, analysts said, on the back of ongoing dollar weakness and potential inflation issues down the road.
"Today's move has been largely a dollar story - you've got euro/dollar testing fresh lows, the same with the dollar index," said Daniel Major, an analyst with RBS Global Banking & Markets in London.
But the US dollar erased its initial losses in a technical rebound, after selling pressure failed to push it through key levels. The greenback edged 0.09 percent higher against a basket of major currencies, according to the US Dollar Index.
Against the Japanese yen, the dollar inched 0.04 percent lower at 89.80. The euro was also practically flat, dipping 0.01 percent to $1.4981.
"We're seeing a minor pullback after stocks didn't sustain new highs," said Brian Dolan, chief strategist at Forex.com in Bedminster, New Jersey.
"But oil and gold are still up and the lack of any movement from the Fed will eliminate any interest rate support for the dollar." - Reuters
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