Gold shines on Dollar weakness, physical shortage

LONDON (Bullion Street): Gold and silver are shining yet again due to dollar weakness and physical shortage as evident from the negative LBMA Gold Forward Rates (GOFO), according to ETF Securities Ltd (ETFS).

In their weekly analysis, ETFS said that EUR/USD rose to the highest level since November 2011 at $1.38 and gold open interest is up 4% since mid-October (8% since Sepember). This shows investors are building up long positions, adding bullish momentum to gold. The US 10 year yields have drops 22 bps and the S&P500 has gained 3.6% to reach new highs. 

Gold has performed strongly, as it seems clear the fact the US debt issue has only been postponed and central bank stimulus is likely to be required for a prolonger period. Such concerns appear to the accelerating central bank's and private investors search for alternatives to the US dollar as a reserve asset.

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