Gold’s All Time Euro High

September 29, 2012 at 09:23

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Physical gold traded in euros hit an all-time high Friday, bolstered by a weaker euro and expectations that the European Central Bank will soon push the common currency lower.

The euro sank as low as $1.2847 against the dollar. Gold is primarily traded in dollars, and as any other currency advances or retreats versus the dollar, gold priced in that currency is adjusted to reflect those shifts.

The precious metal is setting records in euros and Swiss francs, but has yet to exceed its all time high in dollars and several other currencies.

To be in a “pure” bull market, a commodity’s price must be climbing in all currencies, “then you can get rid of the currency effect,” said BNP Paribas senior metals strategist Stephen Briggs.

Gold is widely considered a currency alternative, and some investors buy the precious metal as a safer way to store their wealth.

“It’s telling you that people are wanting to buy gold instead of currencies,” said Mr. Briggs.

However, a lower euro-dollar exchange rate is not the only factor driving gold prices higher in euro terms, said Tim Harvey, senior vice president at ETF Securities, a provider of exchange traded funds including several funds that purchase and store gold bullion on behalf of their clients.

The euro hit a two-year low of $1.2061 on July 24, but euro-denominated gold traded well off the year’s high that day, at EUR1311 a troy once, Mr. Harvey said.

Instead, a large part of gold’s recent success has come from investor concerns about additional easing measures from the world’s central banks, he said.

The ECB is expected to institute new easing measures in response to Spain’s anticipated request for a financial rescue.

“We’ve seen more quantitative easing come through in the last six weeks … and we’ve seen steady inflows into gold, where investors have been steadily increasing their exposure in gold over that time,” Mr. Harvey said.

Quantitative easing will largely flood the economy with more money. Some investors fear it will spark inflation, leading them to see gold as a safe haven.