Gold rose to a seven-week high as fluctuations in currency markets boosted demand for the precious metal as an alternative investment.
The euro fell against the dollar in the two weeks ended June 17 on speculation that the Greek government will struggle to pass austerity measures to avoid a default. Gold prices in U.K. pounds rose to a record today. The metal gained for seventh straight sessions, the longest rally since April.
“Gold is in a unique position of being able to go higher, despite a stronger dollar, which is a very bullish signal,” said Matthew Zeman, a strategist at Kingsview Financial in Chicago. “A lot of nations are running deficits that are not sustainable in the long run. There comes a point where people just don’t believe in paper currencies.”
Gold futures for August delivery rose $7, or 0.5 percent, to settle at $1,553.40 an ounce at 1:50 p.m. on the Comex in New York. Earlier, the metal reached $1,559.30, the highest for a most-active contract since May 2, when the price reached a record $1,577.40.
Gold has climbed 25 percent in the past 12 months as escalating sovereign-debt woes and record-low U.S. borrowing costs increased the appeal of the metal as an alternative to currencies. The price denominated in euros reached an all-time high on May 25.
Greece’s government won a vote of confidence and needs parliamentary approval next week for 78 billion euros ($112 billion) in budget cuts to prevent default.
The U.S. Federal Reserve has kept its main interest rate close to zero percent since December 2008 and is expected to end a second round of so-called quantitative easing at the end of the month.
Gold may trade between $1,500 to $2,000 over the next five years, analysts at Bank of America Merrill Lynch said yesterday in a report.
“Given the expansion of the global money supply in recent years, it is unlikely that investors will sell their gold below” $1,000, the bank said. An average gold price above $2,000 “would require a disorderly sovereign default in the euro zone or QE3 in the U.S., both of which are not our base case for the moment,” the analysts said.
Silver futures for July delivery rose 36 cents, or 1 percent, to $36.739 an ounce on the Comex.
Platinum futures for July delivery climbed $5.20, or 0.3 percent, to $1,752.40 an ounce on the New York Mercantile Exchange.
Palladium futures for September delivery rose $3.40, or 0.4 percent, to $770.65 an ounce on the Nymex.
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