BLBG:Gold Trades Near Record as Obama Warns of ‘Deep Economic Crisis’ From Debt
Gold traded within 0.6 percent of an all-time high as U.S. lawmakers remained deadlocked on how to tackle the country’s debt crisis and avert a default before an Aug. 2 deadline, stoking demand for a protection of wealth.
Immediate-delivery bullion was little changed at $1,614.43 an ounce at 11:31 a.m. in Singapore after President Barack Obama said that the nation’s burgeoning debt levels threatened to do serious damage to the economy. Spot gold advanced to a record $1,624.07 yesterday.
Obama, in a televised address, called on lawmakers to cut the deficit while raising the debt ceiling with a “balanced” approach, blaming the stalemate on a group of Republicans in the House who insist on budget cuts and no tax increases. In response, House Speaker John Boehner said that the president had created a “crisis atmosphere” surrounding the debt issue.
“We remain bullish,” said Wei Chishan, an analyst at Shanghai Metals Market. “At the back of everyone’s mind, U.S. policy makers will reach an agreement at the last minute, however, this doesn’t mean all will be well with the economy.”
Obama said that a failure to get a deal risks forcing the U.S. to default on some of its obligations, which may trigger a surge in interest rates. “We would risk sparking a deep economic crisis,” Obama said.
Gold futures in New York were 0.2 percent higher at $1,616.90 an ounce after touching an all-time high of $1,626.30 yesterday. Cash silver traded little changed at $40.38 an ounce.
‘Could Tumble’
“When the issues get resolved the gold price could tumble, so short term I’m bearish,” Tom Winmill, who manages the Midas Fund in New York, said on Bloomberg Television’s “Street Smart” before Obama’s speech. “It could go down $100, that’s the fear premium that’s built up.”
Concern a fiscal crisis in Europe that started in Greece is spreading to Italy and Spain helped drive a 7.8 percent rally in spot gold in the past month. Euro-area leaders announced last week 159 billion euro ($229 billion) in aid for Greece, prompting Moody’s Investors Service to cut Greece’s rating yesterday as the latest rescue package implies “substantial” losses for private creditors.
Spot platinum declined 0.5 percent to $1,780 an ounce while palladium gained 0.2 percent to $810 an ounce.
To contact the reporters on this story: Glenys Sim in Singapore at gsim4@bloomberg.net
To contact the editor responsible for this story: Richard Dobson at rdobson4@bloomberg.net
