Gold Sets Records in Euros and Francs on Currency Concern

Gold Sets Records in Euros and Swiss Francs on Currency Concern
One thousand gram gold bars. Photographer: Kerem Uzel/Bloomberg

Gold climbed to a record priced in euros and Swiss francs on concern that central banks’ moves to boost economies will devalue currencies, spurring demand for the metal as an alternative investment.

Bullion for immediate delivery in London reached 1,379.32 euros an ounce and has rallied 14 percent this year, data compiled by Bloomberg show. Gold priced in dollars rose 13 percent this year to $1,771.30 by 4:49 p.m. local time and is trading 7.8 percent below the all-time high set in September 2011. The commodity set a record 1,667.18 Swiss francs today and peaked in Indian rupees earlier this month.

Bullion, typically priced in dollars, is extending 11 consecutive annual gains as the Federal Reserve announced a third round of quantitative easing and as central banks from Europe to China to Japan also pledged more action this month. Nations from South Korea to Kazakhstan are boosting their gold reserves and metal held in bullion-backed exchange-traded products rose to a record 2,551.9 metric tons valued at $145.3 billion on Sept. 25, data compiled by Bloomberg show.

“Central banks are weakening their currencies to boost their economies and gold is a beneficiary,” Matthew Turner, a precious metals strategist at Mitsubishi Corp. International (Europe) in London, said today by phone. “The story of weak currencies and strong gold is back in play and it’s not just the dollar, it’s all currencies.”

Fed Stimulus

The Fed said Sept. 13 it will buy $40 billion of mortgage debt a month and probably hold the federal funds rate near zero until at least the middle of 2015. The Bank of Japan said last week it will add to a fund that buys assets, the European Central Bank announced an unlimited bond-purchase program Sept. 6 and China approved a $158 billion subways-to-roads construction plan.

The 17-nation euro area is contracting as leaders strive to rein in the debt crisis. European bar and coin demand rose 15 percent to 77.6 tons in the second quarter, according to the London-based World Gold Council.

Higher local prices in India, last year’s biggest buyer, may curb consumption. The country’s imports slipped 56 percent in the second quarter, according to the World Gold Council. Jewelers there held a strike in March and April to protest government taxes on imports.

Gold reached an all-time high of 97,644.88 rupees on Sept. 13, data compiled by Bloomberg show. While gold in British pounds is about 8.5 percent below its September 2011 high, it still climbed about that much since the beginning of January.

“The dollar price is still the focus of the market and sometimes what it is showing is a weak dollar, rather than strong gold,” Turner said. “When gold is at a high in many currencies, it’s not a currency effect.”

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