New York 02/03/2011 - Gold on the Comex division of the New York Mercantile Exchange hit a new record high on Wednesday as the crisis in the Middle East and North Africa and inflationary concerns continue to add buoyancy to an already red-hot market.
Gold futures for April delivery were recently up $8.30 at $1,439.60 an ounce in New York. That represents a fresh lifetime high for the yellow metal.
"With oil over a $100 a barrel, investors are scared to death of inflation. They're looking for a safe place to park some of their assets. Gold and silver are very attractive to those who are risk-adverse," a US-gold trader said.
Libya now appears to be in the verge of a protracted civil war and the country's oil exports are said to have been cut in half.
Additionally, there are growing signs that the geopolitical unrest could spread to other to oil producing countries in the region, such as Oman.
Light sweet crude on the Nymex is now trading above the psychologically important $100 per barrel level at $100.17, up 54 cents for the day.
"There's a large contingent of investors out there who are playing the 'what if' game. What if we're entering into a prolonged period of high energy prices?" the trader asked.
"Despite what [Fed chief Ben] Bernanke might say, the market thinks that higher energy costs will lead to inflation and that's why gold is posting a new record today," he answered.
Bernanke attempted to downplay the risk of inflation in testimony to the US Senate and House today and yesterday. The recent rise in commodity prices will likely only lead to a "temporary and relatively modest increase" in US consumer price inflation, Bernanke argued.
"Despite, sky-rocketing oil and near record global food prices, the Fed apparently has no intention of tightening its monetary policy or ending its quantitative easing (QE2) programme early. This is very supportive of gold and silver," said the trader, responding to Bernanke's testimony.
In Europe, PPI in January came in at 1.5 percent, above an expected 1.1 percent and up from 0.8 percent previously. This is another piece of news that stoked inflationary concerns. The market will closely watch tomorrow's ECB interest rate announcement.
In the currency markets, the euro remains firm against the dollar at 1.3871, which is near a four-month high.