Gold Futures Rise to Settle at Record as Equities Slump Amid Debt Concerns

Gold futures rose, closing at a record $1,259.30 an ounce, as a slump in equities spurred demand for the precious metal as an alternative investment.

The price reached an intraday high of $1,261.60 as stocks in Asia, Europe and the U.S. fell on heightened concern that the global economy will struggle. The record was $1,266.50 on June 21. The euro dropped as much as 1.4 percent against the dollar as an industry group said Germany’s 10 largest banks may need fresh capital to meet new regulations.

“Gold is back in vogue with the stock-market weakness,” said Adam Klopfenstein, a senior market strategist at Lind- Waldock in Chicago. “People want protection from a downdraft in stocks. You’re seeing a lot of the flight-to-quality bid come into gold.”

Gold futures for December delivery closed up $8.20, or 0.7 percent, at 1:39 p.m. on the Comex in New York. The previous record settlement was $1,258.30 on June 18.

The price has gained 15 percent in 2010. The metal had climbed for nine straight years.

Gold priced in U.K. pounds and euros rose to the highest level since July 1. The MSCI World Index of equities dropped as much as 1.2 percent.

German lenders including Deustche Bank AG need to raise about 105 billion euros ($134 billion) to reach an estimated 10 percent Tier 1 capital ratio, a key measure of financial strength.

‘Sell-Euro’ Trade

“European-bank concerns are flying back into the picture,” Klopfenstein said. “The sell-euro-buy-gold trade is back on.”

Investors may shift to gold as U.S. Treasury demand drives down yields, said Matthew Zeman, a metal trader at LaSalle Futures Group in Chicago.

“There are tough times ahead, and people are going to seek safety,” Zeman said. “There’s going to be a lot of buyers switching out of Treasuries for the yellow metal because the yield is too low.”

Silver futures for December delivery fell 3.5 cents, or 0.2 percent, to $19.914 an ounce. Earlier, the price reached $20.045, the highest level since March 19, 2008.

The Comex was closed yesterday for Labor Day.

To contact the reporters on this story: Pham-Duy Nguyen in Seattle at pnguyen@bloomberg.net.

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