April, 11, 2011, Los Angeles – Gold prices surged a record setting 3.24 percent or $46.20 to end the week higher at $1,474.30 an ounce while the price of silver gained 8.29 percent or $3.13 to finish the week at $40.90 an ounce while the Gold/Silver ratio dropped to 36.04, its lowest level in 28 years, as silver reaches its most expensive level relative to gold.
The week began with Fed Chairman Bernanke saying on Monday that as long as commodity prices eventually stabilize, they will not be reflected as inflationary. Crude oil and food prices continue to stoke fears of inflation among investors as they climb to their highest levels since 2008. “There is no question that the inflation factor is supporting gold,” said Bruce Dunn, vice president of precious metals dealer Auramet Trading.
The IMF warned last week that the world economy should get used to higher oil prices in the foreseeable future. “The persistent increase in oil prices over the past decade suggests that global oil markets have entered a period of increased scarcity,” it said. “Given the expected rapid growth in oil demand in emerging market economies and a downshift in the trend growth of oil supply, a return to abundance is unlikely in the near term” as reported by Javier Blas.
With the euro near a 14 month high against the dollar, the European Central Bank raised interest rates 25 basis points for the first time in three years. The Bank of Japan and the Bank of England left their rates as they were while China raised their rates 25 basis points for the second time this year. The latest rate increase takes China’s deposit rate to 3.25 percent and when subtracted from its 4.9 percent inflation rate, real interest rates are still a negative 1.65 percent, which should explain China’s voracious appetite for gold and silver bullion.
Gold bullion investors received some good news last week after Congress approved legislation that eliminates the new Form 1099 tax reporting requirements that were included in the Patient Protection and Affordable Care Act. The provision, Section 9006 required investors to file a Form 1099 with the IRS whenever they made a transaction that paid out $600 a year to another party. With gold and silver prices at current levels, the paperwork for dealers and investors would have been overwhelming.
Although the provision had nothing to do with health care, it was added to help pay for the health care program. The Industry Council for Tangible Assets (ICTA), a trade group for the rare coin, precious metals and tangible assets industry said it was cautiously optimistic that the repeal will become law. It now awaits President Obama’s signature, which by all accounts should happen soon.
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American Bullion specializes in adding gold and silver to retirement accounts. If you have a question or would like to know more about your investment options, please call American Bullion at 1-800-326-9598 to speak with a precious metals specialist.