Gold Futures Extend Rally on Demand for Haven; Silver Jumps -
By Pham-Duy Nguyen
May 7 (Bloomberg) --
Gold rose to a near record in New York, capping the third straight week of gains, as Europe’s fiscal crisis spurred demand for the metal as a haven. Silver jumped the most since November.
The MSCI World Index of equities dropped to a three-month low on speculation that Europe’s debt crisis will spread.
Gold advanced to as high as $1,214.90 an ounce, 1 percent below the Dec. 3 record, after the Dow Jones Industrial Average yesterday had the biggest intraday loss since the market crash of 1987.
“Gold is the first level of safe-haven appeal,” said Adam Klopfenstein, a senior market strategist at Lind-Waldock in Chicago.
“There’s a lot of fear out there, and who knows where the next shoe will drop?
People want to be in something tangible coming into this weekend.”
Gold futures for June delivery rose $13.10, or 1.1 percent, to $1,210.40 an ounce on the Comex in New York, for a 2.5 percent increase this week and a 10 percent advance for this year. The all-time high is $1,227.50.
The Group of Seven is holding a conference call today to discuss Greece’s debt risks following the plunge in global equities.
“People are nervous about what’s going on in the rest of the world,” said Michael Cuggino, who manages $6 billion in the Permanent Portfolio fund, which includes a 20 percent holding in bullion.
“It’s a safe bet that the bigger the problem is in Europe, the larger the impact it will be on the U.S. economy.”
‘Financial Turmoil’
The Standard & Poor’s 500 Index dropped as much as 3 percent today, and the bonds of debt-laded nations in Europe tumbled.
Gold “does well in periods of financial turmoil, so it is good to have some just in case,” said Barry James, who helps manage $2 billion at James Investment Research in Xenia, Ohio, including a 5 percent allocation in exchange-traded funds in bullion and mining stocks.
The euro rose as much as 1.4 percent against the dollar and fell as much as 0.3 percent. The 16-nation currency tumbled 5.1 percent in the previous four sessions.
“It’s a flight to safety against these wild currencies,” said Frank Lesh, a trader at FuturePath Trading LLC in Chicago. “Gold being the international currency is the most stable environment now.”
Gold priced in U.K. pounds and Swiss francs climbed to records today. The metal denominated in euros reached an all- time high yesterday.
Assets in the SPDR Gold Trust, the biggest exchange-traded fund backed by bullion, yesterday jumped 19.78 metric tons to a record 1,185.79 tons.
Demand for gold bars and coins was “exceptionally strong” yesterday, notably in Germany this week, UBS AG said in a report.
Silver Rally
Some investors purchased silver because gold is too expensive, analysts said.
“Silver is the poor man’s gold,” said Klopfenstein of Lind-Waddock.
“If people want a true safety instrument, they should be in gold.”
Silver futures for July delivery rose 93.6 cents, or 5.3 percent, to $18.451 an ounce, the biggest gain Nov. 16.
Today’s rise helped silver narrow its loss for the week to 0.5 percent.
“Silver’s cheap,” said Frank McGhee, the head dealer at Integrated Brokerage Services LLC in Chicago.
“It got hammered earlier this week and Europe just came in and scooped it all up.”
Platinum futures for July delivery dropped 70 cents to $1,665.80 an ounce on the New York Mercantile Exchange, narrowing the week’s loss to 4.5 percent. Earlier, the metal fell as much as 1.3 percent.
Palladium futures for June delivery fell $3.90, or 0.8 percent, to $510.20 an ounce, capping an 8.2 percent loss for the week. It was the biggest weekly decline since early March.
To contact the reporter on this story: Pham-Duy Nguyen in Seattle at pnguyen@bloomberg.net.
Last Updated: May 7, 2010 14:40 EDT
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