BLBG:Gold May Rally as Italy Credit-Rating Cut Boosts Demand for Haven Assets
Gold rebounded from its biggest drop in a week on concern that the European debt crisis is worsening, spurring demand for haven assets including bullion.
Gold for immediate delivery gained as much as 0.4 percent to $1,785.72 an ounce, and traded at $1,781.46 at 10:36 a.m. in Singapore. It shed 1.8 percent yesterday as concern about a potential Greek default drove up the dollar. December-delivery bullion in New York advanced 0.3 percent to $1,783.90.
Standard & Poor’s Ratings Services cut Italy’s credit rating by one level yesterday on mounting government debt and weakening growth prospects, sending the euro and Asian stocks lower. The Dollar Index rose for a third day as investors sought to diversify away from declining equities and commodities.
“There is scope for gold to rally as Europe’s problems cannot be settled overnight and Italy’s rating downgrade is an example of this,” said Zhang Qian, an analyst at Haitong Futures Co., China’s largest brokerage by registered capital. “The situation in Greece is very serious and the possibility of contagion across Europe is very real. As for the U.S., there still aren’t clear signs that the economy there is healthy.”
Italy joins Spain, Ireland, Portugal, Cyprus and Greece in having their credit ratings downgraded this year. Greece will hold another call today with its main creditors after a “productive” round of discussions with European Union and International Monetary Fund officials yesterday about securing a sixth installment of rescue funds aimed at staving off default.
In the U.S., Federal Reserve policy makers will gather in Washington today for a two-day meeting to discuss whether additional measures are needed to spur the economy amid data economists say may show that construction of new homes fell.
Cash silver fell 0.4 percent to $39.4975 an ounce, while spot platinum was little changed at $1,775.25 an ounce and palladium traded 0.3 percent higher at $716.63 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
