Bloomberg News

Gold Nears Record in London as Debt Crisis Spurs Investor Demand

July 13, 2011

July 13 (Bloomberg) -- Gold climbed to within 0.2 percent of a record in London as concern about Europe’s debt crisis spurred demand for the metal as a protection of wealth. Bullion rose to an all-time high in British pounds.

Ireland joined Portugal and Greece yesterday as the third euro-area nation to have its credit rating cut to below investment grade, sending the metal in euros to the highest-ever levels. The cost of insuring debt from Italy, Spain and Portugal climbed to records this week.

“With European sovereign debt fears intensifying again, little clarity on what euro-zone officials intend to do next,” gold is benefiting, Edel Tully, a London-based analyst at UBS AG, said in a report today. “This should, in theory, be gold’s time to shine as a safe haven and as an alternative currency.”

Immediate-delivery gold gained as much as $7.48, or 0.5 percent, to $1,575.18 an ounce, the highest price since the May 2 record of $1,577.57. It was little changed at $1,569.75 by 11:18 a.m. in London. Gold for August delivery was 0.5 percent higher at $1,570.60 an ounce on the Comex in New York.

Bullion rose to $1,571.50 an ounce in the morning “fixing” in London, used by some mining companies to sell output, from $1,550.50 at yesterday’s afternoon fixing. An eighth daily advance today would be the best winning run since the nine days of gains to April 25.

Gold is up 10 percent in 2011 after climbing the past 10 years, the longest run of gains in at least nine decades. Europe’s debt crisis helped bullion reach a record two months ago. The metal reached a record 987.59 pounds an ounce today.

‘Negative’ Outlook

Moody’s Investors Service lowered Ireland to Ba1 from Baa3 yesterday, citing the probability the country will require additional official financing. The outlook remains “negative,” Moody’s said. The euro yesterday slid to a four-month low versus the dollar as European finance ministers failed to present a solution to the financial contagion that’s threatening to spread to Italy from Greece, Ireland and Portugal.

“Gold can easily reach $1,600 in the next one or two months as the debt crisis in Europe worsens,” Li Fang, an analyst at Zhonghui Futures Co., said from Shanxi. “Gold is trading at elevated levels even though we are in a weak demand season. When physical buyers come back in the fourth quarter, we fully expect prices to push even higher.”

UBS raised its one-month gold forecast to $1,575 from $1,475 and kept its three-month estimate at $1,600.

Record investment demand for gold in India will keep climbing as higher incomes spur buying even with the metal trading near an all-time high, according to Reliance Capital Asset Management Ltd., which operates the second-biggest gold- backed fund in the world’s largest consumer.

Silver for immediate delivery rose 1.2 percent to $36.53 an ounce in London. Palladium gained 0.9 percent to $772.50 an ounce. Platinum was up 0.6 percent at $1,741.80 an ounce.

--With assistance from Madelene Pearson in Mumbai. Editors: John Deane, Sharon Lindores

To contact the reporter on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net; Glenys Sim in Singapore at gsim4@bloomberg.net

To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net


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