Gold
Climbs to Record as Investors Seek Alternative to Currency By Kim Kyoungwha
and Nicholas Larkin - Last Updated: May 12, 2010 08:29 EDT
May
12 (Bloomberg) -- Gold rose to a record in New York and London
on investor speculation that international financial support
for indebted European states will depress currencies.
Gold has gained as investors
questioned whether a loan package worth almost $1 trillion
will prevent a repetition of Greece’s debt crisis in
other European states. Bullion rose to all-time highs in euros,
British pounds and Swiss francs today. Holdings in the world’s
biggest exchange-traded fund backed by the metal have advanced
5.2 percent this year to a record.
“All we can do is to
put our money into real assets, because paper money everywhere
is being debased,” Jim Rogers, the commodity investor
who is chairman of Rogers Holdings in Singapore, told Bloomberg
Television today.
Gold futures for June delivery
climbed as much as $25.10, or 2.1 percent, to $1,245.40 an
ounce and were at $1,239.40 at 7:52 a.m. on the Comex in New
York. Gold for immediate delivery rose 0.5 percent to $1,239.05.
The metal advanced to $1,241.25
an ounce in the morning “fixing” in London, used
by some mining companies to sell production, from $1,222.50
at yesterday’s afternoon fixing. Spot prices have climbed
in seven of the past eight weeks.
Gold is up 13 percent this
year, heading for its 10th consecutive annual gain. The euro
has dropped 11 percent against the dollar in 2010, the MSCI
World Index of shares has slipped 1.7 percent and returns
on benchmark U.S. Treasuries have advanced.
‘Overbought’
Market?
“Even though we believe
the market is slightly overbought in the short run, it still
has some way to go in case risk sentiment remains sour,”
said Andrey Kryuchenkov, an analyst at VTB Capital in London.
Gold’s 14-day relative
strength index, a gauge of whether a commodity or security
is overbought or sold too heavily, climbed to about 75. To
some technical analysts, a reading over 70 signals that prices
may head lower soon.
Europe’s debt crisis
“isn’t going to be that easy to fix,” said
Gavin Wendt, senior resource analyst with Mine Life Pty in
Sydney. Gold is being driven by “fear that even though
they’re throwing a hell of a lot of money at this, it
won’t be resolved and that these debt issues will continue
to spread to other countries, primarily Spain and Portugal.”
European policy makers agreed
at the weekend to a region- wide lending plan after a 110
billion-euro ($139 billion) support package for debt-laden
Greece a week earlier failed to convince investors that similar
sovereign debt crises would not be repeated in other nations.
More Debt
“They’ve waved
this magic trillion-dollar wand in front of everyone, but
where is it going to come from?” Frank McGhee, head
dealer at Integrated Brokerage Services LLC in Chicago, said
yesterday. “They’re stopping a debt problem by
creating more debt. Sooner or later, everybody stops trusting
paper, and that’s the lure of gold.”
Bullion rose to 980.0135 euros
an ounce, 833.6573 pounds and 1,381.505 Swiss francs today.
The metal climbed to 115,523.3 yen, the highest price since
February 1983.
There are “more reasons
to hold gold now than there were even 12 months ago, when
we had the remnants of the financial crisis,” Mine Life’s
Wendt said. A forecast for prices of $1,500 an ounce by year-end
would be “quite a reasonable target” given renewed
demand, he said.
Gold in one month will be
at $1,300 an ounce, up from a previous forecast of $1,200,
and silver will be at $18.50, up from $16, UBS AG analyst
Edel Tully said today in a report. She increased her three-month
price forecasts for gold to $1,200 and silver to $17.25.
$1,800 an Ounce
“A bubble is forming
with sovereign debt,” said Peter Sorrentino, who helps
manage $13.8 billion at Huntington Asset Advisors in Cincinnati,
adding that gold may soar to $1,800 an ounce within three
years. “We want to hold gold as a reserve of wealth,
because there’s a big devaluation of G-7 currencies
ahead.”
Among other precious metals
futures, silver for July delivery rose as much as 1.9 percent
to $19.665 an ounce, the highest price since March 2008, and
was last up 1.4 percent at $19.56. Platinum added 0.6 percent
to $1,711.50 an ounce, its third consecutive gain. Palladium
advanced 1 percent to $537.50 an ounce.
Silver and platinum are likely
to “wax and wane” with the economic outlook because
of their industrial uses, Wendt said. Silver, often associated
with photography and jewelry, is used in industrial products
from ball bearings to chemical catalysts, according to the
Silver Institute. Platinum is employed in automotive pollution-control
gear.