Jul 28, 2011
Gold price hit new record high 1628
The Day’s Story:Gold prices rose to record highs above $1,625 on Wednesday, with silver and palladium also
rallying, as concerns over the prospect of a US default prompted investors to buy precious
metals as a haven from risk.
Bitterly divided Republicans and Democrats are are scrambling to find common ground with
less than a week before the government hits its borrowing limit, with chances of a quick
resolution receding after a vote on a deficit plan by Republican Speaker John Boehner was
pushed back to Thursday from Wednesday.
Failure to lift the debt ceiling by August 2 could trigger a debt default, while a budget plan
that flinches from hefty cuts in the deficit could result in a downgrade of the country’s top-notch
credit rating, analysts said.
Spot gold hit a fresh record high of $1,628 an ounce and was up 0.3 per cent at $1,623.36 by
“There is not only uncertainty about a possible downgrade (for the US) but a possible default
if the debt ceiling is not increased. That is reflected in gold prices and people are positioning
themselves for a worst-case scenario,” said Georgette Boele, head of forex and commodities
research at ABN Amro. Bullion has gained more than eight per cent in July and has hit six
all-time highs in the past ten sessions, as US lawmakers were locked in a standoff over
dueling debt plans that offered little prospect for compromise.
The dollar sank to a three-month low against a basket of currencies, while stock markets
declined in Europe and oil ?prices fell.
US Treasuries, whose safe-haven status would be undermined by a downgrade, have held
up relatively well due to the large size of the market and widespread holdings, but the gap
between higher-yielding Treasuries and equivalent German debt expanded to its ?widest
“If there isn’t a last minute compromise (in theUS debt talks) then the situation will get more
and more critical. Gold is one of the alternatives toUS treasuries and therefore there is further
upside potential,” said Peter Fertig, a metals consultant at Quantitative Commodity Research.
Risk aversion was also stoked by doubts over whether measures to stem the euro zone debt
crisis were enough to stop it spreading elsewhere in the bloc, to larger economies such as
Italy and Spain. The prime minister of heavily-indebted Greece told party lawmakers on
Wednesday that low interest-rate rescue loans to Greece, agreed at an EU summit last week,
amount effectively to a euro bond. —
Gold price down to test 1610 for support after hitting 1628 (new record high). Investors are
beginning to cash in from recent gains. Gold price could be testing 1610 repeatedy for support.
Upper resistance remains in the 1628-1630 area.
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