GOLD rose as safe-haven buying resumed this morning amid a steep sell off in equities and worries about European sovereign credit, with Hungary the latest nation said to be facing a debt crisis.
But whereas investors sought safety in the yellow metal, traders sold platinum, palladium and silver, which all have far greater industrial uses than gold and thus suffered due to economic worries.
Gold for August delivery settled $US7.70, or 0.6 per cent, higher at $US1217.70 an ounce on the Comex division of the New York Mercantile Exchange.
"It's the continued haven buying and concerns about what new headlines there could be over the weekend," said George Gero, vice president with RBC Capital Markets Global Futures in New York. Investors often turn to the metal as a store of value at times of economic and geopolitical uncertainty.
So-called safety buying of gold let up in recent days when Europe's debt problems did not appear to be worsening. However, investors again sought gold as a store of value when the euro dipped below $US1.20 for the first time in four years and comments from an official with Hungary's ruling party indicated the nation may be suffering similar debt problems as Greece.
Technically, gold also drew support when it dipped only slightly below $US1200 overnight and avoided activating sell stops thought to be lurking below the market, Mr Gero said. These are pre-placed orders triggered when certain chart points are hit.
Gold is one of the few markets to trade higher, with the Dow Jones Industrial Average closing 3.15 per cent lower and nearly all commodities weaker.
Earlier, benchmark gold dipped just below $US1200 for the first time since May 25. Some bulls initially sold to move to the sidelines as traders fretted about a number of offsetting factors.
Upbeat comments about the economy from Thomas Hoenig, president of the Federal Reserve Bank of Kansas City, late Thursday put some pressure on gold, said Mike Daly, gold specialist at PFGBest in Chicago. Hoenig said whenever the Federal Reserve starts tightening monetary policy, rate increases could exceed 25 basis points.
"Any time you have Fed people and talk of raising rates in the same sentence, it freaks gold bulls out and they (exit positions to) take profits," Daly said.
Rate increases would support the US dollar, which in turn tends to pressure gold. Prior to the recent safe-haven demand for gold due to European debt problems, gold had tended to move inversely to the greenback for years. A muscular US dollar reduces the need to buy gold as a currency hedge and makes all commodities more expensive for holders of other currencies.
There also are market worries about the International Monetary Fund selling more gold to raise funds to aid financially strapped European nations, Mr Daly said.
Still, Mr Daly said, the bulk of the recent news for gold remains bullish.
Besides the ongoing European debt saga, he cited geopolitical tensions. This includes the Korean peninsula after Seoul accused North Korea of sinking a South Korean patrol ship in March. Tensions also continue in the Middle East after Israel's bloody seizure of a Gaza-bound aid ship early in the week.
Furthermore, a rise in US May non-farm payrolls was not as impressive as it may have seemed at first glance, adding to concerns about the global economy. The 431,000 increase fell short of the forecast of 515,000, and the bulk of the new hiring was temporary jobs for the 2010 Census.
"With uncertainty rising in Europe and banks feeling jittery, it appears the next week ought to be both volatile yet favorable to gold," says a research note from MKS Finance.
Analysts reported that longer-term demand for gold remains strong. Holdings to back the world's largest gold exchange-traded fund, SPDR Gold Shares, rose 21.3 tonnes Thursday to a record 1289.84.
Meanwhile, platinum, palladium and silver all tumbled with equities as worries about the economy weighed on sentiment for industrial demand. Further pressure came from fears Europe's debt problems will slow its economy, plus efforts so far this year by China to cool its growth, Mr Gero said.
Silver for July delivery fell US63.2 cents, or 3.5 per cent, to $US17.299 an ounce. July platinum lost $US17.60, or 1.1 per cent, to $US1525.30. September palladium slid $US19.80, or 4.4 per cent, to $US431.
