Gold may extend a record rally after topping $1,800 an ounce for the first time on increased demand for a haven investment as global equities plunged on escalating European and U.S. debt woes.
Immediate-delivery metal advanced as much as 1.2 percent to $1,814.95 an ounce, and traded little changed at $1,791.55 at 12:29 p.m. in Singapore after overturning an intraday loss. The December-delivery contract climbed as much as 1.9 percent to $1,817.60 on the Comex in New York, rising for a fourth day.
Asian stocks extended the global rout today, with the MSCI Asia Pacific Index falling 0.9 percent. The Dow Jones Industrial Average sank 4.6 percent to 10,719.94 yesterday, the lowest level since September 2010.
“It’s just a complete breakdown of investor confidence,” said Gavin Wendt, director at Mine Life Pty. “It’s not just even the U.S. situation but it’s also the European situation that’s really worrying markets at the present time. It just seems to be the domino effect.”
CME Group Inc. (CME) increased the initial margin on gold futures to $7,425 per contract from $6,075 with effect from the close of business today, according to a website statement. The maintenance margin will rise to $5,500 from $4,500, it said.
Gold has surged after Standard & Poor’s cut the U.S. credit rating by one level from the top AAA grade on Aug. 5. That S&P announcement, combined with Europe’s sovereign-debt crisis, spurred a rout in global equities and stoked concern that the U.S. may lapse into another recession.
“Physical gold is the ultimate collateral because it has no credit risk,” Bank of America Merrill Lynch, said in a report dated Aug. 9. The bank raised its 12-month forecast to $2,000 an ounce on the increased chance for another round of U.S. asset purchases, known as quantitative easing.
To contact the reporter for this story: Glenys Sim in Singapore at gsim4@bloomberg.net
To contact the editors responsible for this story: James Poole at jpoole4@bloomberg.net
