Tags: Gold | Rises | Witch’s | Brew | Debt | Currency | Woes

Gold Rises on ‘Witch’s Brew’ of Debt, Currency Woes

Thursday, 14 Jul 2011 12:40 PM

Gold futures rose to a record for the second straight day on speculation that debt woes in the U.S. and Europe will escalate, boosting the appeal of the precious metal as a haven. Silver also gained.

Moody’s Investors Service said the U.S. may lose the Aaa credit rating held since 1917. Fitch Ratings said that a default in Greece is a “real possibility.” Yesterday, Federal Reserve Chairman Ben S. Bernanke signaled that monetary policy may ease further to bolster the U.S. economy. The dollar dropped for the third consecutive day against a basket of currencies.

“Gold is going higher on a witch’s brew of debt crisis, further stimulus, a weaker dollar and a loss of confidence in paper currencies and government,” said Matthew Zeman, a strategist at Kingsview Financial in Chicago.

Gold futures for August delivery rose 40 cents to $1,585.90 an ounce at 11:22 a.m. on the Comex in New York. Earlier, the price reached a record $1,594.90.

The Fed is prepared to take additional action if the economy appears to be in danger of stalling, Bernanke said yesterday. He said a failure by Congress to raise the nation’s $14.3 trillion debt limit would lead to a “major crisis” and throw “shock waves” through the financial system.

The U.S. was put on a credit-rating review for the first time since 1996 on concern the debt threshold will not be raised in time to prevent a missed payment of interest or principal, Moody’s said.

President Barack Obama and congressional leaders have failed to reach a compromise on reducing deficits and raising the debt ceiling. The government will exceed its borrowing authority on Aug. 2, the Treasury Department has said.

‘Massive’ Haven Buying

“If you don’t have a miraculous solution to all the world’s problems out there, then gold has to go higher,” said Frank McGhee, the head dealer at Integrated Brokerage Services in Chicago. “There’s massive safe-haven buying into gold.”

The metal may surge to $2,000 if the Fed starts a third round of U.S. debt purchases, said Michael Pento, a senior economist at Euro Pacific Capital Inc. “People will be forced into buying gold.”

Silver futures for September delivery rose 64.4 cents, or 1.7 percent, to $38.795 an ounce. On April 25, the metal reached $49.845, the highest since January 1980.

The price will climb to $62 this year, McGhee of Integrated Brokerage said. “Silver is still cheap compared with gold,” he said.

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Gold futures rose to a record for the second straight day on speculation that debt woes in the U.S. and Europe will escalate, boosting the appeal of the precious metal as a haven. Silver also gained. Moody s Investors Service said the U.S. may lose the Aaa credit rating...
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Thursday, 14 Jul 2011 12:40 PM
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