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Mon 22 Aug 2011 09:54 AM

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Gold soars to record high on economic woes

Nervous investors flee to safe haven amid fears of another US recession, EU's debt crisis

Gold soars to record high on economic woes
Persistent flow of weak macro data out of the US and a complete lack of confidence in marginal economies of Europe have driven gold to consecutive record highs (AFP/Getty Images)

Spot gold surged 1.4 percent to score an all-time high for a
third consecutive session on Monday, as nervous investors fled to the safety of
the bullion amid fears of another US recession and the euro zone's debt crisis.

Spot gold struck a record top above $1,878 an ounce, after
staging its biggest weekly gain in 2-years last week. US gold jumped 1.6
percent to a record high of $1,881.9 earlier in the day.

However, prices climbed down slightly later in the day as
Asian stocks turned positive when some investors returned to pick
bargains after the market posted its worst performance in two weeks last
Friday.

By 0309 GMT, spot gold was up 0.6 percent at $1,869.49. US
gold stood at $1,872.80, up 1.1 percent from previous close.

Persistent flow of weak macro data out of the United States
and a complete lack of confidence in marginal economies of Europe have driven
gold to consecutive record highs, said Tom Price, Global Commodity Analyst of
UBS.

"We are not expecting anything supporting the US
economy or the macro data for at least a couple of months," said Price,
"Europe we regard even weaker. We are thinking $1,900-$2,000 over the very
short period of time is a likely target."

Investors are waiting for signs of further stimulus from the
US Federal Reserve when bankers gather in Jackson Hole, Wyoming, late this
week, one year after Chairman Ben Bernanke launched a second round of
quantitative easing to revive the economy.

Additional bond purchase by the Fed could raise inflation
outlook and further boost gold, but many view the chances of a third round of
quantitative easing limited and expect the Fed to take gradual measures to
boost the economy.

Technical analysis suggested that gold could pierce through
$1,900 over the day, said Reuters market analyst Wang Tao.

Holdings in the SPDR Gold Trust, the world's largest
gold-backed exchange-traded fund, rose to 1,290.762 tonnes by August 21,
highest in a week and half.

But speculators scaled back their bullish bets in US gold
futures and options for a second week last week, as bullion's rapid rally
prompted some investors to liquidate positions, data showed.

"Key resistance in gold will be found at $1,946,
however, the market may need an extraordinary event to take it above that
level," said MF Global in a research note.

Other precious metals tracked gold's strength.

Spot silver rose as much as 2.5 percent to a three-month
high of $43.93, extending a 10-percent rise last week - its best week since
December.

Spot platinum hit a three-year high of $1,887, on course for
its 10th consecutive session of rise.

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