Gold Rallies Above $1600 on EU News, Weaker USD

Gold Bullion Value Going HigherLos Angeles, CA – August Gold futures rose to a two week high Wednesday on a strengthening Euro and weakening U.S. Dollar. Gold rose $23.50 or 1.5% to $1601.60 per ounce after a European Central Bank council member said there are arguments for getting a banking license for the ESM (European Stability Mechanism). Silver futures followed suite, rising $.36, or 1.30% at $27.31 an ounce.

The rally in precious metals came as “speculators figured that the latest batch of economic data from the U.S., China, Germany, and the U.K. would convince one or more of the central banks involved to take simulative monetary action sooner rather than later,” stated Kitco analyst Jon Nadler. In a report released Wednesday, the U.K.’s economy shrank in the 2nd quarter, which is an indicator that business confidence is lower than usual. This report and other recent economic data suggest growth worldwide is slipping, which increases the possibility that the Federal Reserve will step in and implement new stimulus.

In addition, European Central Bank policymaker Ewald Nowotny said “there are pro arguments” for giving the European Stability Mechanism a banking license. This would give the ESM access to European Central Bank funds and enable greater leverage of existing contributions for aid to nations in debt. If access to these funds is not available, the ESM may not have enough to bail out Spain and Italy as a result of their sovereign debt. The possibility of more funds to support the European debt crisis caused the Euro to rally, dropping the U.S. dollar index. Commodities such as gold and silver typically rise in value with a weakening dollar.

Many analysts and investors are anxiously awaiting next week’s Federal Reserve meeting to hear fresh news concerning the potential announcement of additional monetary stimulus. The meeting takes place next Monday and Tuesday with any changes in policy being announced on Tuesday afternoon. News of an additional round of quantative easing (QE3) has many financial experts believing gold will rapidly increase in value as massive inflation and further weakening of the U.S. dollar would occur.

Protect your assets from turbulent global economies; precious metals such as gold and silver act as a rock-solid hedge against inflation and the weakening U.S. dollar. To learn how you can own physical gold for home delivery or to convert some of your paper-backed assets in your retirement account into a gold IRA or silver IRA, please contact American Bullion 800-326-9598 or email us at for more information.