Bloomberg News

Gold Climbs to Six-Week High as European Concerns Spur Demand

November 08, 2011

Nov. 7 (Bloomberg) -- Gold climbed to a six-week high in New York as concerns about Europe’s debt crisis spurred demand for the metal as a protection of wealth.

Italian Prime Minister Silvio Berlusconi’s allies pressured him to step aside after contagion from the region’s sovereign debt crisis pushed Italy’s borrowing costs to euro-era records. That overshadowed Greek Prime Minister George Papandreou’s agreement to step down, sending European equities lower.

“Gold is responding to the general market mood that the European crisis will develop much worse before it gets better,” said Bayram Dincer, an analyst at LGT Capital Management in Pfaeffikon, Switzerland. “At the moment we do not have a foreseeable lasting solution and high uncertainty remains.”

Gold for December delivery gained as much as $25.20, or 1.4 percent, to $1,781.30 an ounce, the highest price since Sept. 22, and was at $1,777.70 by 8 a.m. on the Comex in New York. Immediate-delivery gold was 1.2 percent higher at $1,776.10 in London.

Bullion is in the 11th year of a bull market and futures reached a record $1,923.70 an ounce on Sept. 6 as investors sought to diversify away from equities and some currencies. The metal is up 25 percent this year.

Papandreou Decision

Papandreou met with Antonis Samaras, leader of the main opposition party, and agreed to step down to allow the creation of a national unity government intended to secure international financing and avert a collapse of the country’s economy. His capitulation caps a tumultuous 10 days that started with him securing a second bailout from the European Union, then roiling markets by unilaterally deciding to put the terms of that rescue to the Greek people in a vote, a plan he then dropped.

Two Berlusconi allies defected to the opposition last week and a third quit yesterday. Six others called for Berlusconi to resign and seek a more broadly backed government in a letter to newspaper Corriere della Sera.

“We still haven’t seen any real concrete, brick-and-mortar action” that could alleviate the European crisis, said David Lennox, a resource analyst at Fat Prophets in Sydney. “The market’s still expecting there to be bad news coming out of Europe. It may not be Greece. They’re now looking at its neighbor in Italy and while that’s still there, the gold price will generally trade up.”

The German government’s gold reserves are off limits for any euro-area rescue measures, government spokesman Steffen Seibert said today, denying a Frankfurter Allgemeine Sonntagszeitung newspaper report yesterday that using the Bundesbank’s gold and currency reserves was mooted as part of a debate on boosting the European rescue fund at the Group of 20 summit.

Silver Gains

Holdings in exchange-traded products backed by gold gained 3.1 metric tons to 2,284.6 tons on Nov. 4, the highest level since Aug. 23, data compiled by Bloomberg show.

Silver for December delivery gained 1.5 percent to $34.605 an ounce in New York. Palladium for December delivery was 1.1 percent higher at $662.55 an ounce. Platinum for January delivery rose 0.8 percent to $1,642.90 an ounce.

--Editors: John Deane, Dan Weeks

To contact the reporters for this story: Nicholas Larkin in London at; Phoebe Sedgman in Melbourne at

To contact the editor responsible for this story: Claudia Carpenter at

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