Gold May Rise Toward Record Price on U.S., European Sovereign-Debt Concern

Gold may rise toward a record set yesterday in New York as concern that the U.S. and Europe will struggle to contain their debt burdens spurs demand for the metal as a protection of wealth.

U.S. lawmakers remained at odds on how to raise the country’s debt limit in time to avoid a default. Standard & Poor’s said Greece will partially default once European officials push through a second bailout plan for the nation agreed to last week. Gold futures reached a record $1,631.20 an ounce yesterday.

“Gold is still the best safe-haven investment,” said Bernard Sin, head of currency and metal trading at bullion refiner MKS Finance SA in Geneva. “In the U.S., we don’t know what damages are going to be created. If you look at Europe, you still have a lot of debt problems.”

Gold for December delivery rose $1.30, or 0.1 percent, to $1,618.60 an ounce by 7:59 a.m. on the Comex in New York. Immediate-delivery gold was 0.2 percent higher at $1,616.40 in London after reaching a record $1,628.05 yesterday.

Gold is up 14 percent this year, heading for an 11th straight annual gain, the longest winning streak since at least 1920 in London. The MSCI All-Country World Index of equities gained 2 percent in 2011, the Standard & Poor’s GSCI Index of 24 commodities is up 10 percent and Treasuries returned 3.3 percent, according to a Bank of America Merrill Lynch index.

Senate Democrats

The House of Representatives planned to vote today on a debt-limit increase proposal that confronts unified Democratic opposition in the Senate. Treasury Secretary Timothy F. Geithner has said the U.S. will run out of options to prevent a default on Aug. 2 if the debt ceiling isn’t raised.

BlackRock Inc. (BLK), Franklin Templeton Investments, Loomis Sayles & Co., Pacific Investment Management Co. and Western Asset Management are among those warning the U.S. may lose its top-level debt rating as officials struggle to raise the $14.3 trillion borrowing limit and reduce spending.

“There are major fundamental issues around the size of debt, the inability to control spending,” Sean Boyd, chief executive officer of Agnico-Eagle Mines Ltd. (AEM), North America’s fifth-largest gold producer, said on Bloomberg Television’s “Taking Stock.” Debasement of paper currencies “is forcing people to start to look at gold,” he said

S&P yesterday lowered its ranking for Greece to CC, two steps above default, and said the outlook on the debt is negative. Last week’s accord also strengthened the region’s bailout mechanism to offer protection to other euro-region nations such as Ireland and Spain to avert contagion.

ETP Holdings

Holdings of the metal in exchange-traded products rose for a third day, climbing 3.1 metric tons to a record 2,131.4 tons, data compiled by Bloomberg show.

“Physical demand is generally staying absent at gold prices above $1,610,” Edel Tully, a London-based analyst at UBS AG, said in a report. “The fact that we’ve begun to see average -- rather than low -- purchases at these levels suggests that buyers are starting to adjust to a much higher gold price.”

South African gold mine workers for AngloGold Ashanti Ltd. (ANG), Gold Fields Ltd. (GFI) and Harmony Gold Mining Co., the continent’s three largest producers of the precious metal, will strike today over wage talks, the Chamber of Mines said yesterday.

Silver for September delivery in New York fell 0.9 percent to $40.22 an ounce after yesterday climbing to a 12-week high of $41.465. Palladium for September delivery slipped 0.4 percent to $830.05 an ounce after touching a five-month high of $847.55 yesterday. Platinum for October delivery was down 0.9 percent at $1,791 an ounce. It reached a six-week high of $1,823 yesterday.

To contact the reporters on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net; Glenys Sim in Singapore at gsim4@bloomberg.net

To contact the editor responsible for this story: John Deane at jdeane3@bloomberg.net

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July 27 (Bloomberg) -- Sean Boyd, chief executive officer of Agnico-Eagle Mines Ltd., talks about the impact of the U.S. debt crisis on gold markets. Boyd also discusses Agnico-Eagle's second-quarter earnings and the outlook for the company. He speaks with Pimm Fox on Bloomberg Television's "Taking Stock." (Source: Bloomberg)