Gold headed for a second weekly gain after rallying to a record yesterday on concern that the wrangling in the U.S. over raising the Federal debt ceiling and the sovereign-debt crisis in Europe will boost haven demand. Immediate-delivery bullion traded 0.3 percent lower at $1,582.45 an ounce at 2:23 p.m. in Singapore, still 2.5 percent higher this week. Gold dropped from its record $1,594.45 after Federal Reserve Chairman Ben S. Bernanke said that he’s not prepared to take immediate action to stimulate the economy. Standard & Poor’s Ratings Services yesterday joined Moody’s Investors Service in putting the U.S. credit rating on watch for a downgrade. U.S. Treasury Secretary Timothy F. Geithner warned there’s no possible extension to the time limit to raise the debt ceiling. He has repeatedly said the U.S. borrowing authority will end on Aug. 2 without congressional action. “The next psychological barrier will be around the $1,600 level,” Natalie Robertson, an analyst at Australia & New Zealand Banking Group Ltd., said from Melbourne. “Given all the uncertainty in the market with the European debt crisis and more recently the U.S., the risk-off sentiment will continue.” In Europe, results of stress tests on 91 banks as part of an effort to reassure investors the region’s lenders have enough capital will be released by the European Banking Authority today. This week, Ireland became the third nation in the European Union to have its credit rating cut below investment grade. Gold for August delivery in New York fell 0.4 percent to $1,582.30 an ounce after reaching an all-time high of $1,594.90 yesterday. Spot silver was little changed at $38.36 an ounce after yesterday touching $39.365, the highest price since May 5. ‘Risk-Aversion Mode’ (For a related story on the U.S. debt rating, click here. For a story on the Europe debt crisis, click here. To read a story on the performance today of currency markets, click here.) “We remain bullish towards gold as the debt crisis in Europe looks likely to worsen in the next two months,” said Xu Jiashun, an analyst at Yongan Futures Co., China’s second- largest futures broker by registered capital. “The heightened risk-aversion mode should send prices higher.” Twenty-four of 27 traders, investors and analysts surveyed by Bloomberg said that bullion will rise next week on increased demand for a protection of wealth. “Investors are once again looking toward gold and the other safe-haven asset types,” said James Moore, an analyst at TheBullionDesk.com in London. Bernanke told the Senate Banking Committee yesterday that the Fed isn’t “proposing to undertake” a third round of so- called quantitative easing, sending the dollar higher. “We just want to make sure that we have the options when they become necessary,” Bernanke said. Dollar Weakness The Dollar Index, a six-currency measure of the dollar’s value, dropped as much as 0.3 percent today after ending little changed yesterday. S&P said there’s at least a 50 percent chance it will cut the AAA rating within 90 days. Gold tends to move inversely to the dollar. “We do see a lot of upside in gold prices given it’s already passed the key resistance level of around $1,550,” said Robertson, referring to a price at which sell orders may have been clustered. “Net-long gold positions have fallen, so there is some more room for long positions to build again. Exchange- traded fund flows are also improving.” Hedge-fund managers and other large speculators cut net- long positions in New York gold futures by 21 percent in the past month, according to U.S. Commodity Futures Trading Commission data. Speculative long positions, or bets on gains, beat short positions by 157,775 contracts in the week to July 5. Holdings in exchange-traded products backed by gold increased for a sixth day yesterday to the highest level since January. Gold held by the products stood at 2,090.34 metric tons yesterday, according to data compiled by Bloomberg. Cash platinum declined 0.8 percent to $1,750 an ounce, while palladium lost 0.4 percent to $773.90 an ounce. To contact the reporter on this story: Glenys Sim in Singapore at gsim4@bloomberg.net To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net

Source