Gold advanced to records in London and New York as concern about more U.S. economic stimulus and debt woes in the country and Europe boosted demand for the metal as a protection of wealth. The dollar fell against six major currencies after Federal Reserve Chairman Ben S. Bernanke said the central bank is prepared to take additional action, including buying more government bonds, to boost the economy. Moody’s Investors Service said the U.S. may lose the Aaa credit rating it’s held since 1917, while Fitch Ratings slashed Greece’s rating and said that a default is a “real possibility.” Investors are concerned “about the impact that further policy easing by the Fed will have on the dollar” and this will support gold, said Peter Fertig, the owner of Quantitative Commodity Research Ltd. in Hainburg, Germany. “The possibility of a U.S. default by not increasing the debt ceiling in time and a possible downgrade is a reason to invest in gold as a safe haven. There is still the risk that the crisis in Europe will prevail further.” Immediate-delivery gold rose as much as $10.77, or 0.7 percent, to $1,593.15 an ounce and was at $1,592.55 by 10:23 a.m. in London. The metal is up for a ninth day, the longest streak of gains since April. Gold for August delivery was 0.5 percent higher at $1,593.60 an ounce on the Comex in New York after reaching a record $1,593.90. Gold, which typically moves counter to the greenback, advanced 12 percent in this year after climbing for the past 10 years, the longest run of gains in at least nine decades. Ireland this week became the third nation in the European Union to have its credit rating cut below investment grade, helping to send gold priced in euros and pounds to the highest levels ever. Fed Action The Fed is prepared to take additional action if the economy appears to be in danger of stalling, Bernanke said yesterday. He said a failure by Congress to raise the nation’s $14.3 trillion debt limit would lead to a “major crisis” and throw “shock waves” through the financial system. The U.S. was put on review for the first time since 1995, on concern the debt threshold will not be raised in time to prevent a missed payment of interest or principal, Moody’s said. U.S. President Barack Obama and congressional leaders have as yet failed to reach a compromise on reducing deficits and raising the debt ceiling before the government exceeds its borrowing authority on Aug. 2. “Gold will benefit from the turmoil,” said Guo Hongjun, head of research at Haitong Futures Co., China’s largest futures broker by capital. “Another round of quantitative easing will hit the dollar hard, drive up prices of commodities including gold, increase inflationary pressures and slow the recovery.” ‘Forced’ Buying Gold may surge to $2,000 if the Fed starts a third round of U.S. debt purchases, according to Michael Pento, senior economist at Euro Pacific Capital Inc. “People will be forced into buying gold,” Pento said. Silver for immediate delivery climbed as much as 2.9 percent to a two-month high of $39.26 an ounce in London, and was last at $39.24. Palladium gained 1.3 percent to $788.25 an ounce. Platinum was up 1.1 percent at $1,772.40 an ounce after reaching a four-week high of $1,775.30. To contact the reporters on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net; Glenys Sim in Singapore at gsim4@bloomberg.net To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net

Source