Gold hits record on global growth worries, Europe debtPosted on Wednesday, August 3, 2011 - 09:46 am
Spot gold rose to an all-time high of $1,661.14 in early Asian hours, hitting its ninth record in 16 trading sessions and up nearly 17 per cent so far this year. It was trading at $1,657.88 by 0424 GMT, little changed from the previous close.
US gold gained nearly 1 per cent to $1,660.6. It rose to a high of $1,664.2, just 30 cents off the record set on Tuesday.
Gold priced in sterling and euro also reached historical highs.
US politicians completed a last-gasp deal to avoid a default on Tuesday, but there was little relief for markets as investors focused instead on how tighter fiscal policy could constrict growth of the world's largest economy.
The size of the US debt remained a concern for ratings agency Moody's. Moody's retained its triple-A rating for the United States' but assigned a negative outlook to it, underscoring the threat of a future downgrade that would drive up the cost of borrowing and could slow future growth.
"People are gravely concerned over government credit and the fact that the US doesn't seem to be offering satisfying measures to assure fiscal positions and there is the sense that it will ultimately have some kind of real consequences in the markets," said a Singapore-based trader.
"We are seeing a fairly large scale of capital flight not just out of the dollar, but out of other currencies as well. The precious metals market has emerged as an instrument of default, no pun intended."
Gold jumped 2.6 per cent in the previous session, its biggest gain since early November just after the US Federal Reserve launched a second round of government debt purchases, or quantitative easing.
Technical analysis suggested that gold's bull run might extend to $1,679, said Reuters market analyst Wang Tao.
South Korea's central bank said on Tuesday it spent more than $1 billion in its first gold purchase in more than a decade, joining the trend among central banks to diversify their foreign reserves amid global growth uncertainties.