Gold price hits another record high; dollar weakens

Gold soared Tuesday to another record high as the dollar weakened after Japan pledged to flood its financial system with more money.

Near-term gold futures in New York surged $23.50, or 1.8%, to an all-time high of $1,338.90 an ounce. Gold’s gain for the year so far: 22%.

Silver on Tuesday was even hotter, up 70 cents, or 3.2%, to a new 30-year high of $22.71 an ounce.

The Bank of Japan cut its key short-term interest rate to virtually zero from what was already virtually zero (0.1%) and said it would set up a fund to buy bonds and other financial assets, hoping to spur the economy — in part by weakening the yen.

The yen part isn’t working as planned: The Japanese currency strengthened slightly Tuesday, staying close to its 15-year high reached Sept. 14. That’s not good news for Japan’s exporters.

It was the dollar that lost ground Tuesday, with an index of its value against six other major currencies falling 0.9% to the lowest level since January.

Federal Reserve officials have made clear in recent days that they’re leaning toward ramping up the central bank’s purchases of Treasury bonds this year. The goal, as with Japan’s move, would be to get more money into the financial system and, hopefully, into the real economy.

Precious-metals buyers view that prospect as assuring further debasement of paper currencies, raising the appeal of hard assets such as gold. Investors also may see policymakers as running scared.

“The decision by the Bank of Japan to purchase everything in sight except for stocks reflects the desperate situation of the central bank,” said Ashraf Laidi, chief market strategist at CMC Markets in London.

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