Gold futures surged to an all-time high as investors sought to protect their wealth against the possibility of a U.S. default that may come as soon as next week amid a standoff over the country’s $14.3 trillion debt limit.
The December-delivery contract gained as much as 0.5 percent to $1,626.90 an ounce on the Comex, beating the previous peak of $1,626.30 set July 25, before trading at $1,624.80 at 10:35 a.m. in Singapore. Spot bullion rose as much as 0.3 percent to $1,624.02 compared to the record $1,624.07.
The House of Representatives is set to vote on a two-step plan backed by Speaker John Boehner that would raise the ceiling before an Aug. 2 deadline while paring the deficit, with voting set for July 28 after a one-day delay. President Barack Obama has threatened a veto. The impasse sent the dollar to a record low against the Swiss Franc yesterday, while pushing the cost of insuring U.S. debt to a 17-month high.
“While most investors remain optimistic that there will be a deal reached by the deadline, the U.S.’s debt isn’t going to go away just because they are in agreement,” said Xu Jiashun, an analyst at Yongan Futures Co., China’s second-largest futures broker by registered capital.
President Obama said on July 25 the lawmakers’ impasse was a “dangerous game” that risked causing a “deep economic crisis.” Moody’s Investors Service, Standard & Poor’s and Fitch Ratings have said they will cut the U.S.’s top-level ranking should a failure to raise the limit lead to a default.
‘Go-to Asset’
(For a related story to the U.S. debt talks, click here. To read a story on the performance today of currency markets, click here. For a page of stories on the U.S. debt debate, click here.)
“Gold, along with a few select currencies, is increasingly the go-to asset as investors seek it out for its safe-haven properties,” James Steel, an analyst at HSBC Securities USA Inc., wrote in a note. “The weakness in the U.S. dollar, the result of the debt impasse, is reinforcing the gold rally.”
Holdings of the metal in exchange-traded products rose 0.3 percent to a record 2,128.229 metric tons yesterday, data compiled by Bloomberg show. Cash and futures prices in China also reached all-time highs today.
The dollar was little changed today against a six-currency basket including the Swiss franc.
Labor disputes in South Africa, the world’s fifth-largest gold producer, may threaten already-limited mine supply and “provide some upside,” according to Australia and New Zealand Banking Group Ltd. analysts including Mark Pervan.
Workers at AngloGold Ashanti Ltd., Harmony Gold Mining Ltd. and Gold Fields Ltd. will join a July 28 strike, protesting together with miners in the country’s petroleum, coal and diamond industries, after rejecting pay proposals. South Africa’s gold mines employ about 134,000 people, according to the country’s Chamber of Mines.
Spot silver was little changed at $40.86 an ounce after rallying 32 percent this year. Cash platinum rose as much as 0.4 percent to $1,814.50 an ounce, the highest price since June 13. Palladium gained 0.2 percent to $837.25 an ounce, after reaching $843.50 yesterday, the highest price since February.
To contact the reporter 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
