Gold Futures Surge to a Record on Haven Demand as Stocks, Bonds Languish
Gold futures rose to a record $1,276.50 an ounce on demand for a haven against turmoil in the global economy and financial markets.
The precious metal, heading for the 10th straight annual gain, has offered a hedge against gyrations in the dollar and the euro amid sovereign-debt woes. Gold has outperformed most stocks and bonds this year. The Federal Reserve and the European Central Bank have kept benchmark lending rates at the lowest level ever to revive the economy.
“People are flocking to gold out of pure confusion,” said Matthew Zeman, a metal trader at LaSalle Futures Group in Chicago. “People would rather play safe than sorry and go for gold as an insurance policy amid this mixed data on the economy.”
Gold futures for December delivery rose $24.60, or 2 percent, to settle at $1,271.70 at 1:45 p.m. on the Comex in New York, the biggest gain for a most-active contract since Feb. 16 and the highest closing price ever. The previous all-time intraday high was $1,266.50 on June 21.
The dollar was poised for the biggest drop since July 15 against a basket of major currencies, increasing the allure of gold as an alternative asset. U.S. Treasuries gained on speculation the Fed will announce additional purchases of the securities this year.
Gold will average $1,400 in the fourth quarter as “risk aversion and fear take precedence over greed as the outlook for Western economies remains obscured by a myriad of unknowns,” Deutsche Bank AG said in a report on Sept. 10.
Spending Soars
The metal has rallied as central banks and governments maintained low borrowing costs and spent trillions of dollars to stimulate economies. President Barack Obama said last week that the U.S. economic recovery has been “painfully slow.” The administration forecasts this year’s deficit will hit a record $1.47 trillion and $1.41 trillion next year.
“More and more traders are starting to gravitate toward safe-haven instruments,” said Adam Klopfenstein, a senior market strategist at Lind-Waldock in Chicago. “The gold market isn’t convinced that the recovery is intact.”
Gold has climbed 16 percent in 2010, while the MSCI World Index of equities was down 0.6 percent this year. Assets in the SPDR Gold Trust, the world’s biggest exchange-traded fund backed by the metal, have gained 14 percent this year.
Gold for immediate delivery reached a record $1,274.95. The previous all-time high was $1,265.30 on June 21. The price rose $26.95, or 2.2 percent, to $1,272.55 at 2:43 p.m. New York time.
The Fed’s rate for overnight loans between banks is zero percent to 0.25 percent. The benchmark may not increase until the second quarter, a Bloomberg survey of economists shows.
‘More Severe’
Some investors are purchasing gold on expectations that government spending and protracted low interest rates will fan inflation.
“The trader in Chicago today isn’t buying gold because of inflation,” Klopfenstein said. “But the longer people talk about low interest rates and quantitative easing, the more severe inflation is going to be when you open that door.”
Inflation expectations, based on the 10-year U.S. Treasury breakeven rate, have fallen to 1.8 percent from 2.2 percent six months ago.
“There are the deflation-believers on one side buying Treasuries and there are the people concerned about money- printing buying gold on the other side,” said Mike Morcos, a senior money manager at Old Second Wealth Management in Aurora, Illinois, which oversees about $1.1 billion. “I lean toward the inflation side.”
Global gold holdings by ETFs were 2,074 metric tons yesterday, according to Bloomberg data from 10 funds. That was almost twice the amount held by Switzerland’s central bank.
Mining Companies
The Philadelphia Stock Exchange Gold and Silver Index, which tracks 16 mining companies, jumped 3.9 percent to 192.82, heading for the biggest gain since May 11.
Silver futures for December delivery rose 28.1 cents, or 1.4 percent, to $20.432 an ounce on the Comex. Earlier, the price reached $20.55, the highest level since March 17, 2008.
Platinum futures for October delivery rose $44.50, or 2.9 percent, to $1,594.40 an ounce on the New York Mercantile Exchange, the biggest increase since Jan. 4.
Palladium futures for December delivery rose $24, or 4.5 percent, to $552.90 an ounce, the largest gain since July 29.
To contact the reporters on this story: Pham-Duy Nguyen in Seattle at pnguyen@bloomberg.net; Nicholas Larkin in London at nlarkin1@bloomberg.net;
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