BLBG: Gold Extends Rally to Five-Month High on European Debt Concerns
May 3 (Bloomberg) -- Gold prices rose, extending a rally to a five-month high, on European debt concerns.
The euro dropped as much as 1 percent against the dollar on speculation that a bailout package for Greece won’t win support from the region’s governments. The metal priced in euros, sterling and Swiss francs rose to records. Gold climbed 5.9 percent last month as investors purchased the metal and the dollar to hedge against financial turmoil in Europe.
“The continued investor angst over the sovereign-debt crisis is going to keep a floor under gold prices,” said Matt Zeman, a metal trader at LaSalle Futures Group in Chicago. “People are willing to pay more for the comfort blanket that is gold.”
Gold futures for June delivery rose $4.30, or 0.4 percent, to $1,185 an ounce at 11:18 a.m. on the Comex in New York. Earlier, the price reached $1,188.40, the highest level for a most-active contract since Dec. 4.
Greece is in talks to win a $159 billion European Union-led bailout in exchange for budget cuts. Standard & Poor’s downgraded credit ratings for Greece, Portugal and Spain last week. Europe’s fiscal crisis has dragged the euro down 8 percent this year against the dollar.
“Even though Greece is getting this money, there’s a lot of doubt about whether they can implement the plan,” Zeman said. “People just don’t feel comfortable with dollars and paper currencies anymore. They would rather go to gold and trade it as a currency.”
‘Best of Both Worlds’
Historically, gold has often moved inversely to the greenback. Last year, the metal rallied 24 percent as the dollar fell 4.2 percent against a basket of major currencies, including the euro.
“The reaction of gold shows the best of both worlds,” said Tom Pawlicki, an analyst at MF Global Ltd. in Chicago. “It can advance despite a weaker euro because a safe haven is needed. It can also advance when the euro is strong because the dollar is lower.”
Investment in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, jumped 1.7 percent last week to a record 1,159 metric tons.
Silver futures for July delivery rose 8.1 cents, or 0.4 percent, to $18.72 an ounce on the Comex.
Platinum futures for delivery in July fell $17.70, or 1 percent, to $1,727.40 an ounce on the New York Mercantile Exchange. Palladium futures for June delivery slumped $12.05, or 2.2 percent, to $543.70 an ounce.
