Los Angeles – Gold bullion prices closed at $1,386.60 an ounce on Friday, 1.5 percent lower for the week and just 3.5 percent below a record all-time high of $1,430.95 an ounce reached on Dec. 7. Silver closed Friday at $28.59 an ounce, down 1.9 percent on the week after climbing to a 30 year high of $30.70 an ounce earlier in the week. The week began with a rare interview aired on CBS's "60 Minutes" show Sunday, where Fed Chairman Bernanke said the central bank may need to boost Treasury purchases beyond the $600 billion proposed in the Fed's second round of quantitative easing (QE2) if it deems it necessary. Bernanke used the opportunity to discredit the foreign critics who denounced QE2 by alleging that it was launched for the purpose of devaluing the U.S. dollar.
The Gold-to-Silver ratio, the number of ounces of silver that can be bought with an ounce of gold, has just dropped to around 46, the lowest ratio in almost four years. The change in the ratio shows silver getting more expensive relative to gold. Gold is getting a boost from evidence that the U.S. economy is not creating jobs quickly enough to bring down unemployment and from Fed Chairman Bernanke's signal last week that the central bank could expand its existing quantitative easing program by buying more government bonds.
"Tactical investors have turned positive on gold and silver and increased their long exposure. In our view, positioning does not look excessive, suggesting that the sector could attract further near-term flows," said Credit Suisse analysts in a note. Gold and Silver have been under a considerable amount of pressure this week, so it is probably a good time to remind ourselves that the same factors that have been driving gold and silver bullion prices higher for the last decade are still very much in place and are indeed more powerful than ever.
In a controversial compromise agreement between Democrats and Republicans, now heading to Congress for a vote, President Barack Obama has agreed to extend Bush-era tax cuts for higher income earners in exchange for the renewal of jobless benefits for the long term unemployed and a one year reduction in Social Security taxes. The tax cut and jobless benefit extensions agreed to by President Obama and Republican lawmakers are estimated to cost “between $700 billion and $800 billion if ultimately signed into law” according to CNN Money.
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