Wednesday the Federal Reserve hinted at the possibility of a third round of quantitative easing, and Moody’s threatened to downgrade the U.S. from its top-notch credit rating if lawmakers fail to raise the debt ceiling, hurting the dollar (NYSE:UDN) and consequently driving up the price of gold, with spot gold (NYSE:GLD) hitting a record $1,594.16 early Thursday and gold futures for August deliver rising $5.60 an ounce to $1,591.30.
While Americans certainly have their reasons to be fearful for the markets and look for a safe-haven investment, Euro-zone debt concerns are more likely the reason for rising gold futures. Fitch downgraded Greece’s credit rating late Wednesday after European leaders announced that they were putting off a summit meeting scheduled for Friday where they were meant to discuss a comprehensive plan for Greece’s second aid package, including how the private sector would be involved.
Already in July, gold is up over 6%, and has gained eight days in a row, with today likely to be its ninth. It has hit record highs for the U.S. dollar, Canadian dollar, and South African rand, among others. Other safe investments like bund futures for the AAA-rated Germany and the Swiss franc also gained as the European stock markets fell.
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The Fed’s announcement that they are considering another round of quantitative easing, which basically amounts to printing money and drives down confidence in the dollar on the expectation of inflation, also drove pricing in other asset classes. Silver (NYSE:SLV) rose 2.7% to $39.28 an ounce, and despite gold’s gains, the gold:silver ratio — the number of ounces of silver needed to purchase an ounce of gold — dropped to its lowest rate since late May at 40.6. Spot platinum rose 1% to $1,768.24 an ounce, and spot palladium rose 1.3% to $782.22 an ounce.