Bullion rose more than 1 percent, its biggest gain after a month of range-bound trading, while silver soared to a 31-year peak. Both drew support from Federal Reserve Chairman Ben Bernanke’s comments late on Monday suggesting he was committed to completing a $600 billion stimulus program as scheduled in June.
On technical charts, gold broke above a double-top technical formation around $1,440 an ounce. This added to a rush of buying triggered by news that Portugal’s leading banks threatened to stop buying government debt hours after a Moody’s downgrade.
“What it shows is that big money continues to believe gold will go higher…because Bernanke wants to grow at any cost,” said Axel Merk, portfolio manager of the $600 million Merk Mutual Funds. “The other reason for gold to go up is that there was a downgrade in Portugal, so people realize there are still some issues.”
Spot gold was up 0.9 percent to $1,449.65 an ounce at 12:50 a.m. EDT (1650 GMT), off the session high, a record $1,452.34 an ounce.
U.S. gold futures for June delivery rose 1.3 percent to $1,451.50 in decent trading volume.
“There has been aggressive selling between the $1,438 and $1,441 level over the course of the past several weeks. Once gold got through $1,441 an ounce, the pressure was off,” said investor Dennis Gartman, publisher of the Gartman Letter.
Silver gained 1.8 percent to $39.12 an ounce, after hitting a session high of $39.19. That was the highest since the Hunt Brothers cornered the market in the early 1980s, when silver briefly hit a record of just below $50 an ounce.
Silver has outperformed gold in recent months, rising 22 percent in the first quarter compared with gold’s 0.7 percent. The gold:silver ratio, which shows how many silver ounces are needed to buy an ounce of gold, fell to a 28-year low at 37.3.
Rising oil and grain prices boosted gold’s appeal as an inflation hedge. Brent crude rose to a 2-1/2-year highs on geopolitical risks to supply from the Middle East, while corn futures hit a record high on persistent worries over tight supplies.
FED MONETARY POLICIES EYED
On Monday, Bernanke said an increase in U.S. inflation has been driven primarily by rising commodity prices globally, and was unlikely to persist.
His comments contrasted with those of other U.S. central bank officials, some of whom called for tighter monetary policy. Those comments weighed on sentiment of bullion investors, even though most economists agree the Fed will not tighten monetary policy in the short term.
Investors will seek more clues about the Fed’s intentions when minutes of the March policy meeting are released at 2:00 p.m. EDT.
Last November, the Fed initiated a $600 billion bond buying program, dubbed QE2 because it is the second round of quantitative easing. The program is scheduled to end in June. Gold has been a major beneficiary since the Fed has kept short-term rates near zero since December 2008.
Oil prices: Oil has been rallying since mid-February, when protests broke out in Libya — Africa’s third-largest oil producer. But traders’ concerns are more about whether the regional unrest will spread to even larger oil producers, like Saudi Arabia, and limit supply coming from the region.
Over the weekend, Nigerian officials said they were pushing parliamentary elections back by one week following violent uprisings in the country. Nigeria is Africa’s largest oil producer. That news gave oil a boost above $108 a barrel Monday.
On Tuesday, crude oil for May delivery was trading close to flat — up 7 cents to $108.54 a barrel. Before Monday’s close, prices hadn’t settled above $108 since September 2008.
China Room to Increase Gold Reserves, Driving World Oil Demand
Gold and silver have consolidated after yesterday’s gains although gains have been made in the Japanese yen which has fallen due to a growing realisation that the nuclear disaster is far from over and will pose massive challenges to the Japanese economy and challenges to the global economy.China trails only the U.S. in oil consumption and is expected to drive world demand in coming years.
According to the U.S. Energy Information Administration, China’s growing energy appetites will account for about 40 percent of increased world demand this year. China will boost oil consumption this year by another 600,000 barrels per day. The U.S. will increase consumption by 130,000 barrels per day.
Here are some other statistics about China’s oil supply and demand.
(All units in thousands of barrels of oil per day)
(Source: Energy Information Administration, 2009 statistics
Meanwhile, the earthquake and tsunami in Japan have since kept investors even more on edge. As the world’s third-largest economy recovers from the disaster and subsequent nuclear crisis, some analysts predict Japan will increase its demand for oil, and send crude prices even higher.
Kachin News Group: Burma blocks main trading point to China- causing higher commodity prices
Burmese military authorities closed the main trading point with China in Kachin State, northern Burma, March 30th, leading to higher commodity prices in the country, according to traders.
The check point at Laja Yang village, close to the Kachin Independence Organization (KIO) headquarters in Laiza, was closed by the Military Affairs Security (MAS), under the northern regional command, as well as police, preventing exports from China entering northern Burma. However, non-trade related travel is allowed through the gate, a trader said.
A Chinese truck in Laiza of KIO-controlled area in Burma before crossing to China. Photo: Kachin News Group
“The price of cement jumped from 6,900 kyats (US$6) to 7,500 kyats (US$8.7) and the price of other commodities, such as housing materials and basic food, is going up,” he said.
The main exports from China coming through the check point every day include basic foods, such as eggs, garlic and fruit, as well as beer, housing kits, machine parts, textiles, clothes and kitchen kits.
These commodities are becoming scarce in Kachin state since the check point closed.
The Burmese military are inspecting vehicles and demanding more money at the check points, which is also contributing to the increase in commodities prices, traders said.
Authorities are also seizing all Chinese exports to Myitkyina, the capital of Kachin State, from a warehouse in Nam San Yang village, between Laiza and Waingmaw Township.
“The junta is not sitting on only one check point but is going around everywhere doing inspections and seizing goods,” the trader said.
Exports to China, such as cucumbers, bananas, corn, rubber and rice are still being allowed.
Although the Burmese military closed Laiza and the Laja Yang Gate to Chinese imports, it still allows them through at Kambaiti, the entrance to the area under control of the former New Democratic Army-Kachin (NDA-K), which transformed into the junta controlled Border Guard Force in 2009.