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Gold Prices Surge As Central Banks Raise Lending Interest Rates

April 8, 2011 by  

Gold prices surge as central banks raise lending interest ratesThe demand for gold assets has reached record levels as investors are responding to rising oil prices and turbulence overseas.

Reuters reports that gold prices hit record highs in London and New York on April 7, as futures for June delivery in the United States peaked at $1,467 an ounce.

Confidence in the global market continues to wane as the European Central Bank recently announced that it has increased interest rates to 1.25 percent. According to the Financial Times, the current equivalency price of a euro is $1.43, which is a 15-month high. Making matters more precarious, Portugal has asked for a financial bailout from the European Union.

Earlier this week, China's central bank announced that it will raise its lending and deposit rate by 0.25 percentage points to 3.25 percent. It was the fourth time since October that China had increased its interest rates, according to Bloomberg.

Meanwhile, unrest in North Africa and the Middle East as well as the ongoing nuclear contamination crisis in Japan has further aggravated concerns over inflation.

"Inflationary fears are fuelling strength in precious metals," Kathleen Brooks, a market analyst with Forex.com, told the Financial Times. "As oil takes another leap higher, gold and silver follow, and there is little standing in its way between where it is now and $1,500 per ounce." 

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