Gold Hits 3-Week High as China Raises Rates, Silver “Outperforms” as Food-Price Inflation Gets “Serious”
By: Adrian Ash
Tuesday, 8 February 2011
London Gold Market Report
THE PRICE OF GOLD jumped to 3-week highs Tuesday morning in London, rising as world stock markets stalled and commodity prices fell following a new interest-rate hike by the People’s Bank of China.
Silver prices also recovered from an earlier dip after touching a four-week high at $29.80 per ounce.
Since the start of Aug. 2010, daily swings in the price of silver have jumped to moving 2.5 times as fast as gold.
That compares with a four-decade average of silver being 1.8 times as volatile as gold.
“You’ve seen emerging-market assets underperform developed-world markets for the better part of two-and-a-half months, and the reason is inflation,” said Swiss bank UBS’s head of emerging-market fixed-income and currency strategy Bhanu Baweja to Bloomberg this morning.
“This is a world obsessed with demand…[and] many central banks’ policy settings are very, very loose…making for serious inflationary pressures.”
The outlook for food prices is that they could rise exponentially from here if we were to see another shock. There’s no buffer right now.”