June 08, 2010, 12:24 PM EDT
June 8 (Bloomberg) -- Gold rose to a record on demand for a haven from financial turmoil in Europe.By Pham-Duy Nguyen
Gold futures climbed to $1,254.50 an ounce in New York and also touched highs in sterling, euros and Swiss francs. European equities fell and Fitch Ratings said the U.K. must deepen budget cuts to protect its top credit rating. Gold has gained 13 percent this year as investors lost confidence in currencies. The euro has plunged 16 percent against the dollar.
“The fear in Europe is very palpable, and it’s spreading to the U.S.,” said Frank McGhee, the head dealer at Integrated Brokerage Services LLC in Chicago. “Gold is the beneficiary of increased worries about expanding sovereign debt, slowing economies and the temptation to devalue currencies. The market is focused on the expanding contagion.”
Gold futures for August delivery rose $3.30, or 0.3 percent, to $1,244.10 at 12:01 p.m. on the Comex in New York. Earlier, the price surpassed the previous all-time high of $1,249.70 set on May 14.
Sterling fell against the dollar after Fitch suggested the U.K. will need to make budget cuts quickly to protect its credit rating. Interest payments on U.K. debt, rated AAA at Fitch, may reach a “staggering” 70 billion pounds ($101 billion) in five years, from 31 billion pounds in the past fiscal year, Prime Minister David Cameron said yesterday.
Gold has rallied for nine straight years and has outperformed stocks, bonds and other commodities. Holdings in exchange-traded funds backed by bullion reached records in the past month, while coin sales surged.
‘Need for Safety’
“Clearly, there’s a need for safety,” said Frank Lesh, a trader at FuturePath Trading LLC in Chicago. “All the other markets are supporting gold. The volatility in the equity and forex markets will continue. Gold is the only thing that isn’t losing investors money.”
Holdings in the SPDR Gold Trust, the biggest ETF backed by bullion, have gained 13 percent this year. The fund’s assets were unchanged at 1,286.36 metric tons yesterday, its website showed. They reached a record 1,289.84 tons on June 3.
“Investment demand is the main driver,” said Tom Pawlicki, an analyst at MF Global Inc. in Chicago. “Investors are just afraid of the unknown.”
Silver futures for July delivery rose 18.8 cents, or 1 percent, to $18.35 an ounce on the Comex. Platinum futures for July delivery increased $9.60, or 0.6 percent, to $1,526.90 an ounce on the New York Mercantile Exchange. Palladium futures for September delivery gained $11.15, or 2.6 percent, to $441.50 an ounce.
--Editors: Daniel Enoch, Steve Stroth.
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
Source: http://www.businessweek.com/news/2010-06-08/gold-rises-to-record-on-demand-for-haven-from-european-crisis.html
