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Sterling and gold surged highest levels decade { January 6 2004 } Original Source Link: (May no longer be active)    http://www.theherald.co.uk/business/7454.html http://www.theherald.co.uk/business/7454.html Sterling and gold pile more pressure on dollar KRISTY DORSEY, Deputy Business Editor January 06 2004 THE value of sterling and gold surged to their highest levels for more than a decade yesterday as continuing dollar weakness pushed the UK currency through the $1.80 barrier and propped up the price of gold. In London trading, spot gold hit $424.20/$424.95 per ounce, the highest level seen since 1990. It and other precious metals were driven higher by the crumbling value of the dollar, which was hammered by dovish comments on Sunday from Ben Bernanke, governor of the interest-rate setting Federal Reserve of the US. Bernanke said there was little risk of a crisis stemming from the fall in the dollar, which had already lost 11% of its value against sterling during 2003. The US currency tumbled yesterday, allowing sterling to hit a fresh 11-year high of $1.8095, after Bernanke said the central bank was correct to hold the US benchmark interest rate at its current 45-year low. "Bernanke's dovish comments were a green light for the market to sell the dollar," said Shahab Jalinoos, senior currency strategist at ABN Amro. "If the Fed does not see a weak dollar as an inflationary threat, there is little reason to raise interest rates." US interest rates of just 1% – combined with that country's large current account deficit – have been the major factors behind the weakness of the dollar in recent weeks. Yesterday's trading saw the US currency hit a new lifetime low against the euro and fresh lows against the yen, prompting Japanese officials to intervene in currency markets to protect domestic export competitiveness. Low interest rates diminish the appeal of dollar deposits, encouraging the outflow of capital at a time when the US needs to attract overseas investment to help fund its current account deficit. However, the lower value of the dollar also makes US exports relatively cheaper, boosting demand for US goods and raising employment prospects. For this reason, US officials led by president George W Bush – who is hoping to bolster his chances of re-election in the current year – have so far avoided measures that might prop up the dollar. "Possibly tempering (dollar) weakness a little this week will be the economic data," said Tim Fox of National Australia Bank. "However, if Friday's strong rises in the global PMI data could not generate a (dollar) recovery, it is debatable how much this week's data will influence things, with only the anticipation of a strong payrolls report likely to temporarily hold things back," he added. With little reason to expect a short-term recovery by the US currency, Fox said the next main event would be the meeting of the Bank of England's monetary policy committee later this week. Although most analysts believe UK rates will remain unchanged this month, the possibility of an increase is still there, and Fox said speculation surrounding this could drive the pound "much higher" this week. Gold rose about 20% in value last year as geopolitical tensions and the declining dollar raised the metal's safe-haven status. Following the passage of yesterday's 1990 mid-price peak of $424.50, a continued rise in gold would next move it into realms last seen in 1988.

Bank of england leaves rate 4 5 in september 2005 { September 8 2005 } Bank of england raises rates first time four years Blair will take britain into euro by 2007 British bank acquires firm { November 15 2002 } British opposition to euro 45perc { May 20 2003 } British pound hits peak against dollar { June 2007 } British sterling pound is third most reserve currency Britons hate euro { July 31 2002 } Britons pile on credit card debt Dollar drops to 26 year low vs pound { June 2007 } Imf warns britain to curb public spending { December 19 2003 } Secrets of the bank of england revealed Sterling and gold surged highest levels decade { January 6 2004 } Files Listed: 13

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