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Gold shines as central banks scorn greenback

Gold prices struck a series of record highs this week, eventually spiking above US$1,100 for the first time, as Asian central banks snapped up the precious metal as an alternative to the dollar.

PRECIOUS METALS: The price of gold hit a record high above US$1,100 an ounce in London trading Friday following a report that Sri Lanka had joined India in purchasing the precious metal in favour of a weak US currency.

“The Central Bank of Sri Lanka has announced that it is buying gold to diversify its reserves,” industry body the World Gold Council (WGC) said in a statement issued before gold struck a record high of US$1,101.42.

Also on Friday, the dollar weakened against the euro as official data showed the US unemployment rate in double digits for the first time since 1983 after reaching 10.2 percent last month.

Gold futures meanwhile had struck a series of highs earlier in the week after the IMF said it had carried out a massive sale of the yellow metal to India.

“Over the past year central banks, which have been net sellers of gold are now a new and increasingly important source of demand,” WGC chief executive Aram Shishmanian said in the council’s statement. “This latest announcement demonstrates that many central banks are reassessing their reserve asset management policies.”

Gold had reached a record high of US$1,087.80 on Tuesday as the IMF said it had sold 200 tonnes of gold to India’s central bank last month for US$6.7 billion to bolster its finances.

Gold and other commodity prices have surged in recent months amid a move away from a sliding dollar. The move accelerated last month on a report that Gulf states may stop using the greenback for oil trading.

The metal is also winning support from fears over a possible spike in inflation.

By late Friday on the London Bullion Market, gold surged to US$1,096.75 an ounce from US$1,040 a week earlier.

Silver jumped to US$17.52 an ounce from US$16.57.

On the London Platinum and Palladium Market, platinum gained to US$1,359 an ounce at the late fixing on Friday from US$1,320.

Palladium climbed to US$330 an ounce from US$324.

OIL: The price of oil rebounded, briefly passing US$81 after the US Department of Energy reported an unexpected drop in crude stockpiles.

By Friday on the New York Mercantile Exchange, light sweet crude for delivery next month rose to US$78.85 from US$78.11 a week earlier.

On London’s InterContinental Exchange, Brent North Sea crude for delivery next month climbed to US$77.28 from US$76.38.
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