Bernanke effect: Gold @ $1532; oil @ $125; silver @ $48; Dh falls to INR11.96

Gold and silver prices gave a bullish reception to Fed Chairman Ben Bernanke’s dovish statement this morning, with the yellow metal making another lifetime high of $1,532.78 an ounce, up by more than $16 an ounce over yesterday’s close at levels above $1,516 an ounce.

By the time Bernanke’s press conference was over and the implications had been digested, silver was up 6.4 per cent to $47.82 in New York trading, and is currently trading at $48.07 an ounce in early Asian trade.

Almost immediately, the dollar slumped further in international foreign exchange markets and commodities prices in dollar terms (read: oil and precious metals) witnessed an upsurge. A barrel of Brent crude is now trading upwards of $125 in international markets, while a gram of 24-carat gold can be had for a lifetime high of Dh184.25 in the UAE’s gold souqs.

Meanwhile, most expatriates in the UAE will feel the pinch of the dollar’s decline (with the UAE dirham in a straight peg to the greenback) as they will have to shell out more dirhams to repatriate the same amount of home currency. The Indian rupee strengthened against the dollar and a UAE dirham now buys INR11.96 as opposed to INFR12.30 a few days ago.

The Philippines peso too has strengthened and expats from that country will need Dh86.28 now to repatriate PHP1,000 compared with Dh85.83 yesterday. Even the Pakistani rupee has strengthened in overnight forex, now trading at Dh1 for PKR22.77 compared with PKR22.81 last evening.

Despite the fact that, during his first press conference yesterday, Bernanke ruled out a third tranche of the Quantitative Easing (QE) programme and downplayed concerns about inflation, investors voted with their wallets and flocked to safe haven commodities.

The US Federal Reserve Board and Federal Open Market Committee (FOMC) released their economic projections from their April meetings shortly before Bernanke spoke to reporters. The FOMC said that it would complete the QE2 as scheduled on June 30, adding that the purpose of the continued securities purchases was “to promote a stronger pace of economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate.”

The FOMC also voted unanimously to keep short-term interest rates near zero, which act as a catalyst to bullion demand for investors looking for a higher return on their capital.

Bernanke said during his press conference that he believed QE2 had been successful in easing financial conditions, but he ruled out a third round of easing, as he said it looked “less attractive” because inflation has risen.

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