Gold rose to a record in London and New York as investors bought the metal to protect wealth from Europe’s financial turbulence and on concern that the economic recovery isn’t as strong as expected.
The metal is set for an eighth weekly gain in nine weeks on speculation debt-cutting measures by European nations will slow expansions. U.S. data Thursday showed slowing manufacturing growth and an increase in jobless claims. European Union leaders Thursday agreed to disclose how banks perform on stress tests, seeking to show the financial system can withstand shocks.
The metal’s “unique property as the ultimate safe-haven currency is making gold an attractive investment,” said Bayram Dincer, a commodity analyst at LGT Capital Management in Pfaeffikon, Switzerland. “Gold’s recent price move is a function of eurozone debt worries. Investors are looking to substitute assets and currencies with gold.”
Gold, up 15% this year, is heading for its 10th consecutive annual gain, the longest winning streak since at least 1920. Bullion has outperformed other commodities as global equities slipped, and this month reached all-time highs in euros, sterling and Swiss francs. Holdings in exchange-traded funds backed by gold reached records, while coin sales from mints accelerated, tightening supplies.
Gold for immediate delivery gained as much as US$13.10, or 1.1%, to US$1,258.25 an ounce and traded at US$1,257.40 at 1:17 p.m. in London. It surpassed the previous all-time high of US$1,252.11 set June 8 and is up 2.5% this week. The metal for August delivery was 0.8% higher at US$1,258.30 on the Comex in New York after reaching US$1,260.90.
The MSCI World Index of equities is down 4.6% this year, and raw materials as measured by the Reuters-Jefferies CRB Index have slid 7.5%. Returns on benchmark U.S. Treasuries have gained 4.7% this year.
“Bullion continues to draw support from its appeal as an alternative asset to currencies, being a perfect hedge against excess liquidity and any sovereign-default risks,” said Andrey Kryuchenkov, an analyst at VTB Capital in London. “Souring sentiment could well push the market higher.”
Bullion has advanced in 2010 even as the dollar, which usually moves inversely to gold, has strengthened as the euro slumped on concern about sovereign finances in Europe. The single European currency has dropped 14% against the dollar this year. The euro was little changed against the greenback today.
Gold reached a record 1,051.27 euros an ounce, 870.65 British pounds and 1,451.16 Swiss francs on June 8, Bloomberg data show.
Reports released Thursday showed U.S. jobless claims increased by 12,000 to 472,000 in the week ended June 12 and lower-than-estimated growth in Philadelphia-area manufacturing in June, casting doubt on the economic recovery’s strength.
Eighteen of 20 traders, investors and analysts surveyed by Bloomberg, or 90%, said bullion would rise next week. None forecast lower prices and two were neutral. Bullion may climb to US$1,270 an ounce if prices hold above US$1,251, according to VTB’s Kryuchenkov.
“We are still very bullish on gold,” said Hwang Il Doo, a senior trader with KEB Futures Co. in Seoul. “Gold will remain the main beneficiary of what’s happening in Europe unless the picture takes a turn for the better.”
Assets in the SPDR Gold Trust, the biggest exchange-traded fund backed by bullion, increased 1.83 metric tons to a record 1,307.96 tons yesterday, according to the company’s website. Global holdings of the metal by ETFs increased 2.57 tons to an all-time high 2,044.62 tons yesterday, according to Bloomberg data tracking 10 providers.
China should increase its holdings of precious metals and oil as it invests its foreign reserves, Yin Zhongqing, vice chairman of the finance committee of the National People’s Congress, said at a conference in Shanghai today. Gold accounts for 1.6% of the reserves held by the People’s Bank of China, according to the World Gold Council.
“Given that the Chinese central bank’s proportion of gold reserves to currency reserves are very low compared with those of the Western central banks, and given the size of China’s currency reserves, it could potentially be a very significant official sector buyer,” Natalya Naqvi, a Barclays Capital analyst, said in a report today.
Silver for immediate delivery in London climbed 1.4% to US$18.9775 an ounce. Platinum was little changed at US$1,576.50 an ounce and palladium was up 0.2% at US$482.52 an ounce.
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