Gold advanced to records in New York and London as the global rout in equities deepened on concern the economic slowdown will worsen after Standard & Poor’s cut the U.S. credit rating.
Bullion surged 23 percent this year, heading for an 11th year of gains, as the sovereign-debt crisis and a faltering economy boosted demand for the metal as a protection of wealth. Holdings in exchange-traded products backed by gold surged 1.4 percent to a record 2,216.8 tons by yesterday, data compiled by Bloomberg showed, an 11th straight day of gains.
“The much-dreaded AAA downgrade did happen after all, but the broader market was already to an extent in sell-off mode, pricing in sovereign default risks in the euro zone and the U.S.,” Andrey Kryuchenkov, an analyst at VTB Capital in London, wrote in a report. “The market remains well-supported while macro concerns over the stagnant economic recovery and fears of further sovereign downgrades will keep the market on edge.”
Gold for December delivery advanced $33.10, or 1.9 percent, to $1,746.30 an ounce on the Comex in New York by 8:22 a.m., after earlier surging as much as 4 percent to a record $1,782.50 an ounce.
Gold for immediate-delivery rose $24, or 1.4 percent, to $1,743.52 an ounce after gaining as much as 3.5 percent to an all-time high of $1,780.10, making the metal costlier than platinum for the first time since 2008. The price yesterday jumped 3.4 percent, the biggest daily advance since January 2009.
Goldman Sachs Group Inc. raised its forecasts for gold futures to $1,730 in six months and $1,860 in a year based on expectations for real U.S. interest rates to stay lower for longer. The previous estimates were $1,635 and $1,730, the bank said in a report dated Aug. 7.
Silver futures for September delivery fell 3.5 percent to $38.005 an ounce. Palladium for September delivery gained 0.2 percent to $730.05 an ounce, and platinum futures gained 0.6 percent to $1,733.20 an ounce.
‘Negative’ Outlook
S&P cut the long-term U.S. rating one level to AA+ from AAA on Aug. 5. The agency described the outlook as “negative” and criticized the nation’s political system for failing to adequately address deficit reduction.
The U.S. rating may be cut to AA within two years if spending reductions are lower than agreed to, interest rates rise or “new fiscal pressures” result in higher general government debt, New York-based S&P said.
“The market is now worried about another global
recession,” Natalie Robertson, a commodity analyst at Australia & New Zealand Banking Group Ltd., said by phone from Melbourne. “The S&P downgrade of the U.S. credit rating has fueled a lot of those concerns and the market is also focusing on the European situation.”
Platinum Premium
The S&P 500 index lost 6.7 percent yesterday as all 500 stocks fell for the first time since Bloomberg began tracking data in 1996. Yesterday’s rout wiped out about $2.5 trillion in global equity values, extending the total loss in market values since July 26 to $7.8 trillion, according to data compiled by Bloomberg.
Gold advanced to a premium over platinum for the first time since December 2008 as demand for a haven outweighed the appeal of platinum used mostly in catalytic converters for the car industry, at risk from a slowing global economy.
Bullion for delivery in June 2012 jumped as much as 2.6 percent today to a record 4,399 yen per gram before settling at 4,348 yen on the Tokyo Commodity Exchange.
Goldman Sachs Group Inc. raised its forecasts for gold futures to $1,730 in six months and $1,860 in a year based on expectations for real U.S. interest rates to stay lower for longer. The previous estimates were $1,635 and $1,730, the bank said in a report dated Aug. 7.
Asian stocks tumbled today, with the MSCI Asia Pacific index sinking 2 percent, paring losses of as much as 5.5 percent. Oil fell as much as 6.9 percent in New York, dropping below $80 a barrel to the lowest in more than 10 months, before rallying for a 1 percent gain.
“The global financial crisis only happened a few years ago,” Robertson said. “I think everyone is very aware of that fact and there are a lot of linkages with what’s happening now with what happened three years ago.”
--Bloomberg
