By Molly Seltzer and Ye Xie
Jan. 23 (Bloomberg) -- The dollar will decline as gold’s 4 percent rally today signals the Federal Reserve may succeed in reviving the economy by pumping money into the financial system, boosting inflation, according to Citigroup Inc.
Gold touched above $900 an ounce, the highest level in more than three months. The metal, along with other hard assets, is viewed as protection when inflation accelerates. The Fed cut the target lending rate last month to a range of zero to 0.25 percent and said it will focus on buying debt.
“Gold and the euro-dollar track each other quite closely,” said Tom Fitzpatrick, chief technical analyst at Citigroup Capital Markets in New York. “A head up in gold prices sends the signal that the euro-dollar can swing higher. There’s increasing realization that the Fed will do whatever it can to reflate the economy. They are going to pump money into the system.”
The CHART OF THE DAY shows the price of gold and the euro versus the dollar, indicating that the precious metal tends to appreciate as the greenback weakens.
Gold futures for February delivery climbed to $897.70 an ounce on the Comex division of the New York Mercantile Exchange. Earlier the price reached $903.80, the highest since Dec. 10. The euro traded at $1.2993 after falling to $1.2765, the lowest level since Dec. 8.
“We think one of these is wrong, and we do not think it is gold,” Fitzpatrick and London-based analyst Shyam Devani wrote in the note, referring to the chart.
To contact the reporters on this story: Molly Seltzer in New York at mseltzer4@bloomberg.net; Ye Xie in New York at yxie6@bloomberg.net
Last Updated: January 23, 2009 15:49 EST
Gold touched above $900 an ounce, the highest level in more than three months. The metal, along with other hard assets, is viewed as protection when inflation accelerates. The Fed cut the target lending rate last month to a range of zero to 0.25 percent and said it will focus on buying debt.
“Gold and the euro-dollar track each other quite closely,” said Tom Fitzpatrick, chief technical analyst at Citigroup Capital Markets in New York. “A head up in gold prices sends the signal that the euro-dollar can swing higher. There’s increasing realization that the Fed will do whatever it can to reflate the economy. They are going to pump money into the system.”
The CHART OF THE DAY shows the price of gold and the euro versus the dollar, indicating that the precious metal tends to appreciate as the greenback weakens.
Gold futures for February delivery climbed to $897.70 an ounce on the Comex division of the New York Mercantile Exchange. Earlier the price reached $903.80, the highest since Dec. 10. The euro traded at $1.2993 after falling to $1.2765, the lowest level since Dec. 8.
“We think one of these is wrong, and we do not think it is gold,” Fitzpatrick and London-based analyst Shyam Devani wrote in the note, referring to the chart.
To contact the reporters on this story: Molly Seltzer in New York at mseltzer4@bloomberg.net; Ye Xie in New York at yxie6@bloomberg.net
Last Updated: January 23, 2009 15:49 EST
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