Gold gains 1pc as debt worries persist
New York, July 23, 2011
Gold rose about one per cent on Friday, having neared its all-time peak as reservations over a bailout plan for Greece and concerns about a lack of agreement on the US debt ceiling spurred safe-haven buying.
"Gold is drawing strength from the European bailout plan and investor nervousness about whether this is going to result in a real resolution. The gold market is voting no," said Sterling Smith, a Country Hedging analyst in St. Paul, Minnesota.
Adding to the uncertainty and to investor interest in less-risky assets was a bomb attack and shooting in Norway that altogether killed at least 17 people.
"Norway was a bit supportive to gold and it will keep the sellers out, especially heading into the weekend," Smith said.
Spot gold reached $1,607.01 an ounce, its highest since setting a record of $1,609.51 on Tuesday, and steadied around $1,602.76 an ounce by 3:46 p.m. EDT (1946 GMT) from $1,587.90 late on Thursday.
In New York, benchmark August gold futures, which trade on the COMEX exchange, gained $14.50 to settle at $1,601.50 an ounce, a 0.91 per cent rise. Prices increased slightly in after-hours trade.
Comex gold activity was healthy with volume about 20 per cent greater than the 30-day average, according to preliminary Thomson Reuters data.
Gold prices have risen more than 12 per cent so far this year.
Analysts, on average, increased their forecasts for the gold price both this year and next, given debt concerns on both sides of the Atlantic, though platinum and palladium may struggle to make major gains.
The rise in gold along with a firmer dollar against the euro indicated that market players were moving into safe-haven assets.
The euro slipped as investors focused on how the second debt rescue package for Greece and steps to stop the European debt crisis from spreading would be implemented.
"We had an agreement, and now players want to look at the details," said Georgette Boele, head of forex and commodities research at ABN Amro.
"If they are getting confident that the agreement is good, you will probably get a new wave of confidence in the markets in general and that will put gold under pressure," she added.
US negotiators have struggled to agree on terms for raising the government's $14.3 trillion debt ceiling. If talks fail by the Aug. 2 deadline, the world's biggest economy would be unable to pay its bills.
The speaker of the US House of Representatives, John Boehner, told fellow Republicans on Friday there was still no deal to avert a debt default, but that talks continued, a senior party member said.
US President Barack Obama told a town hall meeting he was sure Congress would reach a deal to avert default.
A biannual Reuters survey of leading analysts' and traders' price forecasts showed that most expect the precious metal to keep rising this year and next.
Respondents forecast a median average gold price of $1,510 an ounce for this year, rising to $1,575 an ounce in 2012.
Among other precious metals, silver was bid at $40.06 an ounce against $39.28, having tracked gold to 2-1/2-month highs earlier this week.
"Recovering industrial demand due to stronger global economic growth anticipated for 2011 should be the key driving factor which will see silver outperforming gold," Credit Agricole said in a note.
Platinum was at $1,791.74 an ounce versus $1,781, and palladium at $802.66 an ounce against $805.47. – Reuters