Gold hits a record high as the dollar swoons

By Daily Maverick Legacy 7 October 2009

Currencies go up – and then they go down. It all seems swings and roundabouts. But currency movements yesterday were truly dramatic, with the standout feature being the record dollar price of gold – a major beneficiary of the dollar’s further decline. The dollar fell after a bizarre story in the UK Independent that Gulf Arabs are planning – along with China, Russia, Japan and France – to end dollar dealings for oil, moving instead to a basket of currencies including the Japanese yen and Chinese yuan, the euro, gold and a new, unified Arab currency of the future. The story was later denied by everybody, but such is the fragile sentiment toward the dollar that almost all currencies strengthened against it. “Let’s get this straight; a South African oil importer would now have to buy gold, euro, yen, gulf currencies and Chinese Yuan (which as a start you can’t) to pay for oil? It’s a non-starter, but the sentiment towards the dollar is such that the news has caused a ripple in global markets.” RMB said in its note to clients this morning. The story was enough to send not only gold higher, but also the euro and rand which has now made up the ground it lost when the MTN/Bharti deal was called off. USD/ZAR is consequently back at 7.45, EUR/USD to 1.47 and New Zealand dollar (NZD), Brazilian real (BRL) and Hungarian forint (HUF) have all made new levels against the USD, RMB reports.

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