Euro-zone crisis intensifies as S&P cuts Italy’s credit rating
By Claudia Assis and Myra P. Saefong, MarketWatch
SAN FRANCISCO (MarketWatch) — Gold futures advanced nearly 2% Tuesday, regaining the $1,800-an-ounce mark as a Standard & Poor’s downgrade of Italy’s credit rating and lingering concerns about Greece pushed investors back to the perceived safety of the metal.
Gold for December delivery GC1Z +1.28% rose $31.20, or 1.8%, to $1,810.20 an ounce on the Comex division of the New York Mercantile Exchange.
“There’s some move to safety” as Europe’s sovereign-debt crisis continues, said Tom Pawlicki, analyst with MF Global in Chicago.
The contract fell $35.80, or 2%, on Monday to finish at its lowest level in more than three weeks as a stronger U.S. dollar pressured commodity prices, and investors were also biting back into the market after the retreat.
Late Monday, Standard & Poor’s Ratings Services cut Italy’s long-term credit rating, to A from A-plus. It also cut its short-term rating to A-1 from A-1-plus, citing a weak economic outlook and prospects for ongoing political gridlock. Read more about S&P’s Italy rating cut.
The rating cut “doused cold water over Italy’s capacity to address their public finances,” analysts at GoldCore said in a note to clients Tuesday.
“As long as governments cower from their responsibilities to balance their budgets and continue to print money instead of paying their bills, gold will likely appreciate in paper money terms,” they said.
In the medium term, gold is likely on a down trend, partly because it has failed to take out highs reached in late August, Pawlicki said.
Large funds have also exited the trade, foreshadowing downward moves that could set gold back to lows around $1,700 an ounce, he added.
Other metals traded higher Tuesday, with copper the exception.
The December copper contract HG1Z -1.41% was down 3 cents, or 0.8%, at $3.75 a pound, extending declines after dropping 3.8% on Monday.
However, December silver SI1Z +1.64% rose $1.08, or 2.7%, at $40.24 an ounce, pivoting away from a 4% decline a day earlier.
October platinum PL1V +0.42% added $16.10, or 0.9%, to $1,788.10 an ounce, while palladium for December delivery PA1Z +0.80% tacked on $7.90, or 1.1%, to $720 an ounce.
Metals traders also awaited the outcome of the two-day meeting of the Federal Open Market Committee, which ends with a statement Wednesday.
The Federal Reserve is expected to announce a plan on Wednesday to swap shorter-maturity government securities for longer-dated ones in another stab at jolting the slow-moving U.S. economy, analysts said on the eve of a key meeting. Read the Fed preview story.
Overall, “the longer-term outlook for gold still remains bullish due to the increasing diversification towards safe-havens, and the prospect of further inflation/debasement on the dollar should further stimulus be seen,” said James Moore, analyst at TheBullionDesk.com, in a daily note.
Claudia Assis is a San Francisco-based reporter for MarketWatch.
Myra Saefong is a MarketWatch reporter based in San Francisco.
