By V. Phani Kumar, MarketWatch
HONG KONG (MarketWatch) — Gold prices hit another record on Tuesday, slicing through the $1,750-a-troy-ounce milestone as a massive sell-off in global equity markets drew safety-seeking investors to the metal.
Gold futures for delivery in December GC1Z +2.52% soared $39.60, or 2.3%, to $1,752.80 an ounce in Asian afternoon trading.
The contract hit a high of $1,774.80 an ounce earlier in the day, and has now surged more than 23% so far in 2011, including a gain in excess of 6% just this week.
Spot gold charted a similar course, hitting a high of $1,773.40 before moving back to $1,749.10 an ounce, still up $31.90 from its U.S. settlement price overnight.
“The U.S. credit downgrade, coming so close on the heels of the debt-ceiling crisis, has left investors searching for a safe haven and choosing gold,” HSBC analyst James Steel wrote in a report, referring to Standard & Poor’s decision to downgrade U.S. debt late last week to AA+ from AAA.
“There may also be an element of concern among investors that the [Federal Reserve] may monetize the debt. The inflationary consequences of such action are supportive of gold. Even if this is not policy, the fear among some investors that this might occur should keep gold well bid,” he said.
The U.S. Federal Open Market Committee is scheduled to meet Tuesday to decide on its monetary policy, amid a debate over whether weakening economic indicators will force its hand in launching a fresh round of monetary easing. Read story on the Fed meeting.
The day’s surge in gold prices have come as most other asset classes got pummeled on mounting worries about U.S. and euro-zone sovereign-debt issues. Read Asia Markets.
Varahabhotla Phani Kumar is a reporter in MarketWatch's Hong Kong bureau.
