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Gold Prices Reach Record Highs As Japan’s Interest Rates And Currency Fall

October 11, 2010 by  

Gold prices reach record highs as Japan's interest rates and currency fallGrappling with a still-weak global economy, governments around the world are lowering interest rates in hopes of spurring growth. This has sent gold prices to record highs, offering new investment and asset protection options. 

On Oct. 4, the Bank of Japan announced that it would keep its overnight lending rate near zero, buy government bonds, real estate trusts and commercial papers in a bid to push longer-term interest rates lower, according to media reports.

This has caused the stock market to go up, and gold prices climbed to $1,333.80 an ounce in mid-morning trading, as commentators expected other nations' central banks to follow Japan's example. Silver prices also rose to a 30-year high.

Paul McCulley, of Pacific Investment Management Co., wrote in a note on his company's website that "U.S. growth trajectory [is] so slow you'd nearly call it stalled."

He added that this makes a new round of interest rates cuts likely.

Given that this type of approach tends to weaken the currency, individuals who would like to protect their wealth from the ravages of inflation may consider investing their assets in precious metals. 

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