Gold Rises as Currencies Crumble

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"Quantitative easing is an unequivocal benefit for gold and silver."

Gold rose back toward $1,350/oz. in Europe Monday as the dollar languished due to expectations the Fed will persist with a loose monetary policy, which helped push gold to a record $1,364.60/oz. last week.

Expectations for further quantitative easing (QE) are likely to continue boosting precious metals, analysts said.

"We view QE and its monetary consequences as an unequivocal benefit for gold and silver in particular, as investors seek out their role as stores of value in times of fiat currency risk," said Morgan Stanley in a note.

Gold is being supported by expectations investors will add to their bullion holdings as a portfolio diversifier, both in the private and official sectors.

Russia's central bank has bought over 100 tons of gold on the domestic market this year, and speculation is rife that other central banks, mainly in Asia, will also lift their holdings.

Gold supply is struggling to meet rising demand. Output in number one producer China was 27.655 tons in August, the Ministry of Industry and Information Technology said on Monday, down 11% from 31.059 tons in July.

Silver hit its highest level since 1980 at $23.65 an ounce and was later bid at $23.21/oz. against $23.20.

Holdings in the iShares Silver Trust, the world's largest silver-backed ETF, rose to a new all-time high at 10,085.62 tons on Friday.

The gold-silver ratio—the number of ounces of silver needed to buy an ounce of gold—fell to its lowest in more than two years Monday near 57, down from above 68 in late August, as silver became increasingly expensive compared with gold.

"We continue to favor silver as industrial demand and imports into China are expected to push the gold/silver ratio lower," said Deutsche Bank.

Platinum was at $1,688.50/oz. against $1,699.35, and palladium at $585.50 against $583.53.

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