Gold surged to an all-time high in New York as investors sought to protect their wealth against the possibility of a U.S. default that may come as soon as next week amid a standoff over the country’s $14.3 trillion debt limit.
U.S. politicians remain deadlocked after a House vote on Speaker John Boehner’s two-step plan to raise the debt ceiling and pare the deficit was postponed from today. President Barack Obama has threatened to veto the measure, sending the dollar to a record low against the Swiss franc yesterday, while pushing the cost of insuring U.S. debt to a 17-month high.
“Virtually everybody expects the debt-ceiling issue in the U.S. to be resolved,” said Eugen Weinberg, head of commodity research at Commerzbank AG. “On the other hand, the huge debt burden is not going to disappear following the agreement, and if the agreement is not reached, it would be a massive blow to the market.”
Gold for December delivery rose $4.40, or 0.3 percent, to $1,623.70 an ounce by 8:13 a.m. on the Comex in New York after reaching a record $1,628.10. Immediate-delivery gold added 0.1 percent to $1,621.40 an ounce in London after touching an all- time high of $1,625.70.
“Precautionary investment demand is supporting gold and silver,” Bayram Dincer, an analyst at LGT Capital Management in Pfaeffikon, Switzerland, said by telephone, adding that gold would be trading below $1,600 an ounce otherwise. “This precautionary demand is currency substitution.”
Obama said July 25 the lawmakers’ impasse was a “dangerous game” that risked causing a “deep economic crisis.” Moody’s Investors Service, Standard & Poor’s and Fitch Ratings have said they will cut the U.S.’s top-level ranking should a failure to raise the limit lead to a default.
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“Gold, along with a few select currencies, is increasingly the go-to asset as investors seek it out for its safe-haven properties,” James Steel, an analyst at HSBC Securities USA Inc., wrote in a note. “The weakness in the U.S. dollar, the result of the debt impasse, is reinforcing the gold rally.”
Holdings of bullion in exchange-traded products rose 0.3 percent to a record 2,128.229 metric tons yesterday, data compiled by Bloomberg show. Silver holdings in ETPs rose 0.6 percent to 14,027.83 tons yesterday, the highest since May, as holdings in iShares Silver Trust, the biggest fund, advanced by 24.25 tons.
Labor disputes in South Africa, the world’s fifth-largest gold producer, may threaten already-limited mine supply and “provide some upside,” according to Australia and New Zealand Banking Group Ltd. analysts including Mark Pervan.
Miners at AngloGold Ashanti Ltd., Harmony Gold Mining Ltd. and Gold Fields Ltd. will join a July 28 strike, protesting together with workers in the country’s petroleum, coal and diamond industries after rejecting pay proposals.
Silver futures for September delivery rose 0.6 percent to $40.945 an ounce after reaching $41.235, the highest price since May 4.
Platinum futures for October delivery rose 0.4 percent to $1,815.10 an ounce after reaching $1,819, the highest price since June 13. Palladium futures for September delivery advanced 0.5 percent to $840.50 an ounce.
“Robust Chinese demand together with the fears of possible strikes in platinum mines in South Africa are providing support,” Commerzbank’s Weinberg said.
Palladium will rise to $900 an ounce and platinum will reach $1,986 by the end of this year, Janet Kong, managing director at the research department of China International Capital Corp., told a conference today. “We are especially bullish on palladium because it is cheaper than platinum and will attract more demand as the” auto industry uses it to replace platinum, Kong said.
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