why gold prices highs on Wednesday august 10 2011

why gold prices highs on Wednesday august 10 2011 : Gold hit fresh record highs on Wednesday as U.S. stock markets resumed their decline on concerns over the U.S. and euro zone economies, and after the Federal Reserve said U.S. interest rates would stay near zero for at least two years.



Spot gold hit a high of $1,779.14 an ounce and was up 1.6 percent at $1,771.45 an ounce at 10:28 a.m. EDT. It also hit record highs in euro and sterling terms.



It has rallied more than 6 percent so far this week after a downgrade to the U.S. credit rating on Friday battered assets seen as higher risk, helped by simmering worries over euro zone debt and the U.S. economic outlook. All these accumulating problems -- the U.S. debt problem, the euro zone debt problem, political discontent -- are really (creating) a perfect storm for gold



The strong statement yesterday from Fed Chairman Bernanke on holding zero interest rate policy until mid 2013 is, from a real opportunity cost perspective, very beneficial for gold, The Fed on Tuesday promised to keep interest rates near zero for at least two more years and said it would consider further steps to help growth.



In early trade they also supported equities, keeping a lid on gold's gains, but the metal later rallied back above $1,770 an ounce as U.S. stocks dropped nearly 3 percent as investors fretted about the economy and high levels of public debt. Read Gold prices prediction August 2011..



Holdings of gold-backed exchange-traded funds were choppy, meanwhile. Global ETF holdings, calculated by Reuters, fell 7.2 tonnes on Tuesday in their first daily decline in thirteen sessions.



The world's biggest gold-backed ETF, New York's SPDR Gold Trust, reported its biggest one-day outflow since January 25 on Tuesday, of just over 13 tonnes. A day before it had seen its largest daily inflow since May last year.



A large outflow was also seen from the iShares Silver Trust, the main silver ETF, earlier this week. The trust said its holdings dropped by nearly 120 tonnes on Monday, the most in a single day since mid-June. They were unchanged on Tuesday.



The ratio of gold to silver prices hit its highest since early February in that session as silver was caught up in wider selling of commodities as gold climbed. It is currently near 46, off a 28-year low of around 31 hit in April.



U.S. gold futures for August delivery were up $31.10 an ounce at $1,775.10.

Gold regained its premium over platinum on Wednesday after hitting parity for the first time since December 2008 earlier this week. It is expected to widen if confidence in the economic recovery remains fragile.