GOLD climbed for a second day today as investors sought a safe place to park cash due to uncertainty about Europe’s debt woes and the pace of growth in China and the US.
The most actively traded gold contract, for August delivery, settled up $US16.50, or 1.1 per cent, at $US1529.20 a troy ounce on the Comex division of the New York Mercantile Exchange. Thinly traded July delivery gold rose $US16.40, or 1.1 per cent, to $US1528.70 an ounce.
Investors sought safe-haven assets such as gold and the US dollar after Moody’s Investors Service yesterday downgraded Portugal’s sovereign-debt rating to junk status.
Some investors buy gold on the belief that it holds its value better than other assets during economic turmoil, and worries about the European Union’s ability to manage member state debt levels have helped push gold to record highs during the last year.
Investors are likely “selling European assets and buying the dollar and gold,” said Michael Smith, president of T&K Futures and Options. “When you get days like today when you see gold and the US dollar up, that makes you think there’s a lot of fear in the market.”
Gold, like other US dollar-denominated commodities, tends to move inversely to the greenback, as a falling US currency makes the futures cheaper for market participants using other currencies. But both safe-harbour assets can rise in tandem when investors are wary of the outlook for other assets.
The ICE US Dollar Index, which tracks the currency against those of some major US trading partners, was at 75.072 at the close of Comex floor trading, up from 74.649 late in the previous New York session.
Also, China’s central bank announced last night its third interest-rate increase this year.
China’s government has been struggling for much of the last year to keep the country’s rapidly growing economy from overheating, raising concerns that tighter credit conditions could hit economic activity in one of the world’s major growth engines and rattle markets.
Metals traders are also looking ahead to tonight’s monthly monetary policy announcement from the European Central Bank and tomorrow night’s US unemployment report.
Silver also rose, building yesterday’s surge of more than 5 per cent as the metal benefited from investors’ flight to safety. September-delivery silver rose US50.6 cents, or 1.4 per cent, to $US35.916 a troy ounce.
Platinum and palladium, demand for which is driven by the auto industry, fell today on a cautious outlook for global growth. Platinum for October delivery fell 0.5 per cent, to $US1733.40 a troy ounce. Palladium for September delivery ended down 0.3 per cent, to $US773.20 an ounce.
