BLBG: Gold May Climb as Concern About European Crisis Stokes Investment Demand
Gold may gain for the first time in three days in New York, reducing a weekly decline, as concerns about Europe’s debt crisis spur demand for the metal as a protection of wealth.
The euro fell versus the dollar on concern issues of collateral required by some nations to take part in another Greek bailout will hinder agreement at a meeting of European officials today. Gold futures, which touched a record $1,923.70 an ounce on Sept. 6, slid yesterday as the European Central Bank said it will coordinate with other central banks to ensure euro- area lenders have enough dollars.
“We view the latest correction in gold as temporary,” Michael Lewis, head of commodities research at Deutsche Bank AG in London, wrote today in a report. Prices “will keep on rising in an environment where concerns toward the global banking system remain.”
Gold for December delivery rose $2, or 0.1 percent to $1,783.40 an ounce by 8:13 a.m. on the Comex in New York. Prices are down 4.1 percent this week, the most since May. Immediate- delivery gold was 0.4 percent lower at $1,781 in London.
Bullion is in the 11th year of a bull market, the longest winning streak since at least 1920 in London, as investors seek to diversify away from equities and some currencies. The metal is up 26 percent this year, outperforming global stocks, commodities and Treasuries.
Collateral Accord?
Finnish Finance Minister Jutta Urpilainen said agreement on collateral was unlikely at the gathering in Wroclaw, Poland. ECB President Jean-Claude Trichet pressed euro-area governments to take decisive action to halt the debt crisis and show “unity of purpose” at the meeting.
Eighteen months of crisis-fighting and 256 billion euros ($352 billion) in aid for Greece, Ireland and Portugal have failed to stabilize markets as the turmoil spread to Italy and Spain.
“They’re only really geared to put out spot fires and play brinkmanship, rather than to deliver a killer package that will actually resolve all their issues,” Tom Price, an analyst at UBS AG, said by phone from Sydney. “In that environment, the problem drags on for years, not months, and it’s a great environment for gold.”
Gold exchange-traded-product holdings fell 4.3 metric tons to 2,145.2 tons yesterday, data compiled by Bloomberg show. Assets reached a record 2,216.8 tons on Aug. 8.
Silver for December delivery rose 1.5 percent to $40.08 an ounce. Platinum for October delivery was up 1.2 percent at $1,802.80 an ounce. Palladium for December delivery gained 1.2 percent to $732 an ounce.
Platinum is trading above gold after dropping below it this week. An ounce of platinum bought 1.18 ounces of gold on average this year in London, down from 1.32 ounces in 2010. The ratio last month fell to the lowest level in almost two decades.
To contact the reporters on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net; Phoebe Sedgman in Melbourne at psedgman2@bloomberg.net
To contact the editor responsible for this story: John Deane at jdeane3@bloomberg.net
