Gold futures rose to a record $1,263.70 an ounce in New York as Europe’s fiscal woes and dimming prospects for the U.S. economy prompted investors to step up purchases of bullion as an alternative asset.
The metal has climbed 15 percent this year, outperforming equities and bonds, while the euro slumped 14 percent. A majority of Greeks believe the country may go bankrupt, an opinion poll showed. Spain has 24.7 billion euros of maturing debt in July and may need to use a financial lifeline from the European Union.
“The problems over in Europe are just as pernicious over here in the U.S.,” said Michael Pento, the chief economist at Delta Global Advisors Inc. “You can’t trust sovereign debt and sovereign currency. Gold is the only real honest money that we have.”
Gold futures for August delivery rose $9.60, or 0.8 percent, to $1,258.30 on the Comex in New York, the highest settlement for a most-active contract ever. The metal has gained 2.3 percent this week and risen four weeks in a row.
Before today, the record was $1,254.40 on June 8. This month, the metal reached all-time highs in euros, U.K. pounds and Swiss francs. Gold for immediate delivery reached a record $1,262.50.
Yesterday, reports showed U.S. jobless claims rose unexpectedly and manufacturing in the Philadelphia region missed forecasts by analysts.
“People are looking at the euro as a wake-up call and they’re skeptical of a U.S. recovery,” said Adam Klopfenstein, a senior market strategist at Lind-Waldock, a broker in Chicago. “The big fear is that there are going to be other governments who are going to have sovereign-debt risks. People are clamoring to get into gold.”
$1,600 Forecast
Gold may reach $1,400 this year and rise as high as $1,600 in 2011 should the Federal Reserve be forced to keep interest rates at a record low to stimulate the economy, said Pento of Delta Global.
U.S. lawmakers, debating a $50 billion jobs bill in Congress this week, are struggling to meet demands to spend more to boost the economy while cutting the government’s $1.5 trillion deficit.
“Smart money like hedge funds and big insurance companies have been accumulating gold,” James Dailey, the chief investment officer at TEAM Financial Asset Management LLC in Harrisburg, Pennsylvania, said in an interview in New York. “Gold has taken the monetary asset role.”
Gold may rally to $1,500 this year, he said.
Assets in the SPDR Gold Trust, the biggest exchange-traded fund backed by bullion, increased 1.83 metric tons to a record 1,307.96 tons yesterday. Holdings are up 15 percent this year.
ETF Demand
Gold may climb to $1,400 in 2010 should the current pace of investment in ETFs continue, Goldman Sachs Group Inc. said in a report dated yesterday.
China should increase its holdings of precious metals and oil, Yin Zhongqing, the vice chairman of the finance committee of the National People’s Congress, said today at a conference in Shanghai. Gold accounts for 1.6 percent of China’s reserves, according to the World Gold Council.
Russia and the Philippines have increased gold holdings this year, the council said today.
“If we come to understand that gold is now a truly reservable asset, we can understand how it can be that bonds can rally on deflation news and gold can do the same,” said Dennis Gartman, an economist and the editor of the Suffolk, Virginia- based Gartman Letter. “Precious metals are no longer driven by fears of inflation, but by the notion that precious metals are currencies.”
Silver, Platinum
Silver futures for July delivery rose 40.8 cents, or 2.2 percent, to $19.184 an ounce on the Comex, capping a 5.2 percent gain this week.
Silver may outperform gold as a “cheap” alternative, Deutsche Bank AG said in a report. Silver will average $20 an ounce in the third quarter and $22 in the fourth quarter, the bank said.
Platinum futures for July delivery climbed $15, or 1 percent, to $1,587 an ounce on the New York Mercantile Exchange. The metal climbed 3.4 percent this week.
Palladium futures for September delivery gained $10.15, or 2.1 percent, to $491.40 an ounce. The metal gained 9.6 percent this week, the most since early March.
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