July 18th, 2011
By: Aaron Smith
Gold prices broke a new record Monday, driven by concerns over mounting debt worries in the United States and Europe.
Gold futures for August delivery reached a fresh high of $1,607.90 per ounce Monday. That’s up more than 1%, from the prior session.
The buying was also helping lift shares of gold ETFs, with Market Vectors ETF Trust (GDX), SPDR Gold Trust (GLD) and Pro Shares Ultra Gold (UGL) moving higher.
The yellow metal has been on a roll since July 12, when it got an extra boost from the minutes of the Federal Reserve’s June policy meeting. They indicated that the central bank could be open to more monetary stimulus.
Further stimulus could undermine the U.S. dollar, triggering a flight to gold, the age-old stalwart in troubled times, when investors are afraid to put their money elsewhere.
“I think people are coming to realize that the economy is weakening again and the government might see a need to try to stimulate the economy further,” said Joe Foster, portfolio manager for the Van Eck Global International Investors Gold Fund (INIVX).
Gold has also been lifted by concerns over European debt, especially from the fiscally hamstrung nations of Ireland and Greece.
“Greece is sort of on the verge of default and they’re still trying to figure out how to engineer a recovery for Greece without inflicting a default on the country [and] the markets are sensing that’s almost impossible,” said Foster. “Until the situation is resolved in these peripheral countries, it’s going to drive gold.”
Jono Remington-Hobbs, precious metals analyst for FastMarkets Ltd. in London, said that gold investors will be closely watching the European Union’s economic summit scheduled for Tuesday.
“European leaders have been kicking the can down the road for so long they don’t realize that they’ve walked into a cul de sac,” he said.
Market does the safety dance
Remington-Hobbs also said that gold prices could be heavily influenced this week by what Federal Reserve Chairman Ben Bernanke says when he speaks Thursday about financial regulation.
Silver was taking its cues from gold, with prices breaking the $40-an-ounce mark for the first time since May 4. Silver rose nearly 3% on Monday to $40.13 per ounce but is still short of its April 25 record of $49.81, noted Remington-Hobbs.
Gold is also still far from its true peak, when adjusted for inflation. Gold hit its real record on Jan. 21, 1980, when it rose to $825.50 an ounce. Adjusted for inflation from 1980 dollars to 2011, that translates to an all-time record of $2,261.33 an ounce.
June 18, 2010
By Carole Vaporean and Amanda Cooper
(Reuters) – Gold bullion came just short of its all-time high and U.S. gold futures ran up to their highest close ever on Thursday on both concern over Europe’s credit problems and downbeat U.S. data which encouraged a fresh sweep into safe-haven assets.
Euro strength also propelled gold’s advance after European ministers jointly backed the publication of so-called bank “stress tests,” along with a successful Spanish bond auction.
Spot gold advanced to $1,244.45 an ounce by 2:29 a.m. EDT from $1,229.60 an ounce late Wednesday. Its session high reached $1,250.65 an ounce, just short of its all-time peak at $1,251.20 hit on June 8.
U.S. gold futures for August delivery surged $18.20 to finish at $1,248.70 an ounce, its highest close on record.
“There’s no consistency right now in terms of good news coming out of the euro zone. And, because of that, it’s making investors feel a bit uncertain about going into riskier assets. Gold is obviously a safe-haven asset to offset that,” said Fred Jheon, managing director of U.S. product development at ETF Securities in San Francisco.
Euro’s push to a three-week high against the dollar also renewed gold buying among some investors who are seeking the precious metal as a substitute currency.
“At the macro level, we’re seeing central banks being net buyers of gold versus being net sellers for the first time in many years. So there’s appetite at that level,” said Jheon.
He added; “Investors are looking at the degradation of the dollar or the euro and are saying, ‘Rather than hold a fiat currency, holding a hard currency like gold is a better investment.”
Fiat currency is a currency that is legal tender by government fiat but has no fixed value against a hard asset such as gold or silver.
The euro gained after a Spanish bond auction soothed worries about the country’s finances and worse-than-expected U.S. data weighed on the dollar.
“Gold is looking for any and every opportunity to go higher, and we all know the reasons why–the safe-haven factor, sovereign debt risks and so on,” said Peter Hillyard, head of metals sales at ANZ Investment Bank.
“The mood is with gold right now, the momentum is with gold and the market will either do nothing or go up,” he said.
Weaker U.S. economic data showing Mid-Atlantic factory activity plummeted in June and a rise in the number of U.S. workers filing for unemployment benefits last week also drove anxious investors to return to gold as a safety play.