Gold futures rose to a record $1,684.70 an ounce as turmoil in financial markets boosted demand for the precious metal as an investment haven. The MSCI World (MXWO) Index of equities has dropped 12 percent from this year’s May peak. The yen tumbled the most since 2008 versus the dollar as Japan intervened to drive down its currency. The euro fell against the greenback as the European Central Bank offered banks additional cash amid the debt crisis. Treasury two-year note yields approached a record low. “The geopolitical backdrop is inherently bullish for gold,” Matthew Zeman, a strategist at Kingsview Financial in Chicago, said in a telephone interview. “As risk appetite wanes, people have been piling into gold and Treasuries. Yields are so low that the only alternative is gold.” Gold futures for December delivery rose $12.70, or 0.8 percent, to $1,679 at 10:29 a.m. on the Comex in New York after earlier climbing as much as 1.1 percent. The price reached an all-time high for the third straight day. Yesterday, holdings in exchange-traded products climbed 4.5 metric tons to a record 2,178.5 tons, data compiled by Bloomberg show. The amount rose for the eighth straight session. Yesterday, the Swiss National Bank cut interest rates and purchased francs to drive down the currency after a rally to a record against the euro. ‘Currency Wars Escalating’ “With currency wars escalating, people want to buy gold so they don’t have to worry about surprise interventions taking away their purchasing power,” Adam Klopfenstein, a senior strategist at MF Global Holding Ltd. in Chicago, said in a telephone interview. Before today, gold gained 17 percent this year. as nations crippled with debt and sluggish economies are forced to keep borrowing rates low. The Federal Reserve has completed two rounds of so-called quantitative easing and kept its benchmark interest rate at zero percent to 0.25 percent to bolster the economy. Legislation passed Aug. 2 to increase the nation’s debt ceiling will “hasten the demise of the dollar as the world’s reserve currency and the desire of investors to own gold” Michael Pento, an economist at Euro Pacific Capital, said in a report. “The only answer central bankers have to solve an inflation problem is to print more money,” Pento said. He predicted in January that gold would top $1,600 this year. Silver futures for September delivery rose 20.7 cents, or 0.5 percent, to $41.1965 an ounce on the Comex. To contact the reporter on this story: Pham-Duy Nguyen in Seattle at pnguyen@bloomberg.net To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net

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