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By Jamie Chisholm for ft.com
Amid all the resurgent ebullience in the broader market, action in the precious metals space speaks of either speculative excess or a frantically blinking warning gauge.
Gold has hit another record of $1,510 an ounce and is currently up 0.6 per cent to $1,507, while silver, up 1.6 per cent to $45.92, earlier breached $46 an ounce for the first time since the Hunt brothers cornered the market in 1980.
The grey metal, in particular, has gone parabolic, gaining 15 per cent in the past seven sessions, and up 130 per cent since bursting through the $20 resistance level just seven months ago.
As funds flow into the bullion market, so the list of reasons for the metals' surge expand. Gold and silver are being bought as a hedge against inflation as oil "“ Brent is up 0.2 per cent to $124.03 a barrel "“ builds price pipeline pressures.
Gold and silver are being bought as investors fret about the fiscal positions of many developed economies, in particular the eurozone. A corollary to this is that some investors fear currency debasement and gold is perceived by its fans as an alternative currency.
Finally, gold and silver are being bought because the dollar, specifically, is tumbling.
If one believes in the rationale behind bullion investment to start with, then all of these reasons for increasing exposure to gold can make sense.
But, the weaker dollar aside, sovereign debt worries and rampant inflation "“ for to justify such a move in gold, surely the inflation must be of the rampant variety "“ are not conducive to such optimism towards stocks, argue the bears.
For example, Brazil on Wednesday raised interest rates from 11.75 per cent to 12 per cent in an attempt to combat inflation, while Greek bond yields suggest a restructuring that could batter exposed European banks.
It is therefore tempting, bullion-wary traders argue, to see the real reason for the latest run-up in gold and silver as pretty much the same driver of the broad risk asset rally: Federal Reserve largesse.
That is due to end in June.
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