Prices bounce back on U.S. debt woes
By Claudia Assis and Myra P. Saefong, MarketWatch
SAN FRANCISCO (MarketWatch) — Gold futures climbed by as much as $13 an ounce Wednesday, finding support from growing concerns over a plan to cap U.S. debt.
Greek lawmakers’ vote in favor of austerity measures considered crucial to secure a fresh round of financial aid and stave off default put pressure on the U.S. dollar, also luring investors to a safe haven.
Gold for August delivery GC1Q +0.74% added $11.30, or 0.8%, to $1,511.50 an ounce on the Comex division of the New York Mercantile Exchange after tapping a high of $1,513.80. Before the Greek vote, it had traded as high as $1,511.20 an ounce.
Richard Hastings, a macro strategist at Global Hunter Securities, attributed the spike in gold’s late-morning trading in New York to “speculative trending to capture a potential problem in the debt ceiling discussions.”
“Gold trades this way, so no surprises here,” he said.
A Republican proposal to avoid an increase in the federal debt ceiling is “unwise, unworkable, unacceptably risky, and unfair to the American people,” Treasury Secretary Timothy Geithner wrote in a letter released to Sen. Jim DeMint, (R., S.C.), who advocated the approach. The letter was released to the news media on Wednesday. Read more of Geithner’s comments.
Meanwhile, the Greek parliament approved a package of additional austerity measures and asset sales in a bid to avert a potentially devastating default, even as thousands have clashed with police in Athens in protest of the spending cuts. Read more about the Greek vote.
“The Greece vote that will make [a Greek] bailout easier pressured the U.S. dollar index, sparking renewed buying in most commodities,” said Darin Newsom, senior analyst at Telvent DTN.
The U.S. dollar index DXY -0.45% , which measures the performance of the U.S. unit against a basket of six currencies, fell to 74.697 from 75.059 late Tuesday. Read about currencies action.
Analysts at MF Global had said a positive vote isn’t likely to generate upside for metals, since it was priced in.
Silver tracks gold higher
Silver tracked gold higher, with the July contract SI1N +3.57% gaining $1.04, or 3.1%, to $34.69 an ounce.
This week, the Peruvian government revoked the license for a silver mine in the country’s southeast after weeks of protests by native groups opposed to its development. Read more about Peru blocking the Bear Creek silver project.
Peru is one of the world’s largest gold and silver producers, but analysts at Barclays Capital don’t expect the recent disruption to impact silver prices.
“Since there is a rather comfortable physical surplus in the silver market, we do not expect the turmoil in Peru to cause significant tightening in the supply-and-demand balance,” the analysts said.
The broader metals complex also traded higher Wednesday, with copper leading the gains.
Copper for September delivery HG1U +2.74% put on 12 cents, or 2.8%, to $4.22 a pound.
July platinum PL1N +1.87% gained $31.20, or 1.8%, to $1,722.90 an ounce, while the September contract for palladium PA1U +2.12% gained $14.40, or 2%, to $749.55 an ounce.
Claudia Assis is a San Francisco-based reporter for MarketWatch.
Myra Saefong is a MarketWatch reporter based in San Francisco. Virginia Harrison in Sydney contributed to this report.
