Tue, Jul 19, 2011 - Page 10 News List

Gold breaks US$1,600 an ounce ceiling

CRISIS OF CONFIDENCE:Investors flocked to the safe-haven as fears mount over the European debt crisis spreading to Italy and Spain and the US defaulting on its debt

AFP, LONDON

The price of gold surged yesterday above US$1,600 an ounce for the first time in history, as investors bought the safe-haven metal amid deepening debt worries in the eurozone and the US.

Gold jumped as high as US$1,600.10 an ounce in early morning trading on the London Bullion Market, as the precious metal extended its recent record-breaking surge, which began on Friday.

“Gold hit another milestone ... at US$1,600 as investors lose confidence in the ability of politicians to get to grip with the debt problems weighing down on sentiment,” CMC Markets analyst Michael Hewson said.

“More advances look likely while this lack of confidence prevails as investors plough capital into the asset,” he said.

Immediate-delivery gold gained as much as US$6.55, or 0.4 percent, to US$1,600.10 an ounce and traded at US$1,596.88 by 8:26am in London. Prices were up for an 11th day, the longest streak of gains since July 1980. Gold for August delivery was 0.5 percent higher at US$1,597.50 an ounce on the Comex in New York after reaching a record US$1,601.

Silver for immediate delivery climbed as much as 1.9 percent to US$40.055 an ounce, the highest level since May 4.

The precious metal is regarded by most investors as a safe--haven in times of global economic turmoil.

This week, eurozone countries will seek to settle their debt crisis at an emergency summit to try and stop Greece toppling into default and dragging bigger EU economies into deeper trouble.

EU President Herman Van Rompuy has said the summit in Brussels on Thursday would focus on both the financial stability of the eurozone and future financing of the Greek program.

France is hoping that a new rescue plan for debt-laden Greece will be agreed at the summit, French Budget Minister Valerie Pecresse said yesterday.

Asked by LCI TV station whether she expected the plan to be adopted this week, the minister responded: “we hope it will be adopted and, from our point of view, the comments by [German Chancellor] Angela Merkel that she wants there to be something concrete on Thursday make good sense.”

Meanwhile, US politicians are wrangling over a deficit reduction plan that would allow US President Barack Obama to avert a potentially catastrophic debt default in return for US$1.5 trillion in spending cuts.

“Gold took out US$1,600 early this morning,” Spread Co analyst Ian O’Sullivan added. “Investors are now adding real fears of a US default to go along with their -European sovereign debt worries.”

Markets has slid last week as the eurozone debt crisis, which has already sunk Greece, Ireland and Portugal, showed signs of spreading to Italy and Spain.

Before the weekend, the EU announced late on Friday that only eight of 91 European banks had failed so-called “stress tests” that were designed to assess their ability to withstand a worst-case economic scenario.

A ninth bank, Germany’s Helaba, said it had failed according to the European Banking Authority’s standards, but passed on its own calculation.

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