Gold May Rise, Extend Longest Winning Streak in Nine Decades, on Debt Woes
By Nicholas Larkin and Glenys Sim, from Bloomberg
Gold may rise for a 12th day after touching a record in the longest winning streak in at least nine decades as debt concerns in Europe and the U.S. spur demand for a protection of wealth. Bullion climbed to an all-time high in pounds and silver advanced to a two-month high.
Bullion held in exchange-traded products yesterday climbed 0.9 percent to 2,120.5 metric tons, the most ever, data compiled by Bloomberg show. European government leaders plan to gather in Brussels this week to break a deadlock over a new Greek rescue that has spooked investors. President Barack Obama vowed to veto a Republican proposal to impose mandatory budget cuts as U.S. officials struggle to reach agreement on how to avoid a default.
“Europe’s debt is a time bomb and while the U.S. will eventually settle the current debt issue, there still exists a lot of uncertainties in that market,” Hou Xinqiang, an analyst at Jinrui Futures Co., said by phone from Shenzhen, China.“Gold’s safe haven properties have been in play recently and ever since the global recession in 2008, it has become a vital part of most people’s investment portfolio.”
Immediate-delivery gold gained as much as $5.25, or 0.3 percent, to $1,610.10 an ounce and traded little changed at $1,604.35 by 11:26 a.m. in London. A 12th day of gains would be the longest streak since at least 1920. Gold for August delivery was 0.1 percent higher at $1,604.40 an ounce on the Comex in New York after reaching a record $1,610.70.
Bullion rose to $1,602 an ounce in the morning “fixing” in London, used by some mining companies to sell output, from $1,599 at yesterday’s afternoon fixing.
European Sovereign Debt
Gold is up 13 percent this year, heading for an 11th straight annual gain, the longest winning streak since at least 1920 in London. The MSCI All-Country World Index of equities gained 1.4 percent in 2011, the Standard & Poor’s GSCI Index of 24 commodities is up 9.8 percent and Treasuries returned 3.5 percent, according to a Bank of America Merrill Lynch index.
Yesterday, stocks declined around the world, the euro fell and the cost of insuring European sovereign debt rose to records amid concern the euro region isn’t any closer to solving the crisis. Greece received a 110 billion-euro ($156 billion) rescue in May of last year from the European Union and theInternational Monetary Fund.
U.S. lawmakers are no closer to meeting an Aug. 2 deadline for increasing the $14.3 trillion debt limit. Moody’s Investors Service, Standard & Poor’s and Fitch Ratings have said they will cut the U.S.’s top-level credit ranking should failure to raise the debt limit lead to a default.
“The world is shunning fiat currencies and is rushing to embrace gold as the only long-standing currency,” economist Dennis Gartman, who owns gold priced in yen, euros and pounds, said in his Suffolk, Virginia-based Gartman Letter. “A correction of serious consequence is coming. Eventually there will be a massive crack in gold and silver,” at which point he will buy more bullion, he said.
The metal touched a record 1,003.32 pounds today and reached an all-time high of 1,144.83 euros yesterday. Investors’ holdings in ETPs are more than all but four central banks, data compiled by Bloomberg and the World Gold Council show.
Silver for immediate delivery climbed as much as 0.8 percent to $40.865 an ounce, the highest level since May 4, and was last down 0.3 percent at $40.43 for a 31 percent rise this year. The best-performing precious metal in 2011 slumped as much as 35 percent from a record $49.79 an ounce set April 25 as Comex’s owner, CME Group Inc. (CME), raised the cost of taking new speculative positions.
“Silver is clearly benefiting from its greater affordability, attracting investors who are keen on hard assets during these uncertain times,” Edel Tully, a London-based analyst at UBS AG, said today in a report.
Palladium for immediate delivery in London gained as much as 0.9 percent to a five-week high of $802.75 an ounce and was last at $797.25. Platinum was up 0.5 percent at $1,780 an ounce after earlier today reaching $1,791.05, the highest price since June 15.
Dr. Pinna says:
I have a good position in gold, and, frankly, I am afraid of adding more, although, I have to admit the world’s economic condition is extremely perilous.
Gold is the world’s oldest currency, and the investors and the world population are saying, quite clearly, that they no longer want to hold their paper money. However, gold is not flexible enough to be used in every day commerce. What I think will transpire is a new currency backed by gold. At that point people holding gold will have their share of the new currency.
This may amount to an explosive growth in the value of their gold holdings. The number 5000 dollars for one ounce of gold has been bandied about by foreign currency traders.
This is all speculation, but it might come true. If it does, gold holders will be in for a very pleasant surprise.