MW: Spot gold hits 2009 high above $960-ounce level
Spot gold breached $960 an ounce in Tuesday's session, reaching its highest level this year, lifted by an unusually strong performance during Asian hours amid heightened risk aversion and a sharp reversal in the Japanese yen's strength.
Spot gold was recently up $20.20 at $961.80 an ounce.
"It is increasingly clear to investors that policy support will not rise to the challenge posed by the economic and financial crisis," said Dariusz Kowlczyk, chief investment strategist with SJS Markets in Hong Kong.
Some of the buying was driven by increased risk aversion following gloomy economic data from Japan and euro zone, he added.
Analysts also attributed the gains to a report by credit-rating company Moody's, which flagged concerns about Western European banks' exposure to Eastern European countries.
"Gold is moving as the last phase of the crisis appears to have started," said Martin Hennecke, an associate director with Tyche Group in Hong Kong.
"We have got at least triple the sovereign-bond issuances this year than last year and rapidly weakening demand. Where bonds can't be sold anymore due to oversupply and weakening financial positions, especially of the U.S. and most of Europe, the only option for governments will be quantitative easing or money printing," Hennecke said.
Traders also noted demand from Japan after the Japanese currency weakened to the 92-yen level against the dollar in Tuesday's session.
"A combination of economic and trade collapse and a collapse of political leadership are beginning to make a dent in unreasonable yen strength," wrote Uwe Parpart, chief Asia economist with Cantor Fitzgerald in Hong Kong.
Parpart said the Japanese currency could weaken to the 95-yen level against the U.S. dollar in the near term, following a likely bounce ahead of the Japanese fiscal year end in March.
The dollar rose 0.47% to 92.10 yen late in Tokyo, up from its open of 91.7 yen.
"The extreme weakness of the Japanese economy was until recently only reflected in the Nikkei 225," Parpart said. "The significant widening of credit spreads takes this step further and signals clear market recognition of growing default risk of major Japanese companies."
