Gold climbed to the highest price since December as potential losses in credit markets spurred demand for the precious metal as an alternative to holding currencies.
Assets in the SPDR Gold Trust, the biggest investment fund that buys bullion, jumped the most in a year this week through yesterday. The euro rose as much as 0.8% against the dollar as European policy makers neared an agreement to rescue Greece.
Gold futures for June delivery advanced $12.40 U.S., or 1.1%, to $1,181.20 U.S. an ounce at 10:45 a.m. on the Comex in New York. Earlier, the price rose to $1,181.90 U.S., the highest since Dec. 4. The record was $1,227.50 U.S. on Dec. 3.
Prices are up 6% since the end of March, heading for the biggest monthly jump since November, as investors bought gold after credit ratings in Greece, Portugal and Spain were downgraded by Standard & Poor’s. Gold climbed to records in euros, Swiss francs and sterling this week.
Investors also bought gold as an alternative to holding dollars, analysts said. The Federal Reserve this week kept the main lending rate between zero and 0.25% to revive the U.S. economy. Rates have been unchanged since December 2008.
Low interest rates will continue to erode the dollar, experts said.
Historically, gold has moved inversely to the greenback. Last year, the metal rallied 24% as the dollar fell 4.2% against a basket of six major currencies, including the euro.
That relationship has changed in 2010 as concern over Europe’s economy boosted the investment appeal of both gold and the U.S. currency. Before today, gold had gained 6.6% this year while the dollar rallied 5.3% against the currency basket.
The administration of President Barack Obama estimates budget deficits will total $5.1 trillion U.S. over five years and reach a record $1.6 trillion U.S. in the year ending Sept. 30. The $1.4-trillion U.S. deficit in 2009 was equal to 9.9% of gross domestic product, the largest share since the end of the World War II.
As of yesterday, the 1.7% increase in the SPDR assets this week was the biggest gain since March 2009, figures from the company show. Holdings yesterday rose to a record 1,159 metric tons. That left assets in 19 gold ETFs worldwide at an all-time high of 1,850.1 tons.
Silver futures for delivery in July increased 18.6 cents U.S., or 1%, to $18.765 U.S. an ounce on the Comex, after earlier touching to $18.79 U.S., the highest price since Jan. 20.
Platinum futures for delivery in July climbed $8.90 U.S., or 0.5%, to $1,742.60 U.S. an ounce on the New York Mercantile Exchange, and June palladium futures rose $3.60 U.S., or 0.7%, to $552.60 U.S. an ounce.
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