Gold Tops $1,800 on Demand for Haven as Equities Tumble, Debt Woes Mount

Gold futures extended a rally to a record, topping $1,800 an ounce, on mounting demand for a haven as global equities plunged amid escalating U.S. and European debt woes.

The MSCI World (MXWO) Index of shares approached the lowest level since September as U.S. stocks tumbled. The euro dropped as much as 1.5 percent against the dollar, and the yen strengthened close to a post-World War II high against the greenback. This week, gold has jumped 8 percent, the biggest three-day rally since November 2008.

“The race to debase currencies is on,” James Dailey, who manages $185 million at TEAM Financial Management LLC, said in a telephone interview from Harrisburg, Pennsylvania. “Gold will continue to appreciate until there is a fundamental shift in government policies.”

Gold futures for December delivery climbed $41.30, or 2.4 percent, to settle at $1,784.30 at 2:13 p.m. on the Comex in New York. Earlier, the price reached a record $1,801, climbing to an all-time high for the third straight day.

This week, the metal has gained $132.50 after Standard & Poor’s cut the U.S. credit rating by one level from the top AAA grade on Aug. 5. The S&P announcement, combined with Europe’s sovereign-debt crisis, spurred a rout in global equities and stoked concern that the U.S. may lapse into another recession.

Photographer: Jerome Favre/Bloomberg

Gold futures extended a rally to a record, topping $1,800 an ounce, on mounting demand for a haven as global equities plunged amid escalating U.S. and European debt woes. Close

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Photographer: Jerome Favre/Bloomberg

Gold futures extended a rally to a record, topping $1,800 an ounce, on mounting demand for a haven as global equities plunged amid escalating U.S. and European debt woes.

Bank of America Merrill Lynch, in a report dated yesterday, raised its 12-month gold-price forecast to $2,000 on the increased chance for another round of U.S. asset purchases, known as quantitative easing.

‘Far From Over’

“The overall problems in the U.S. are far from over, and the appetite for haven assets like gold is very strong,” said Viral Shah, a vice president at Geojit Comtrade Ltd. in Mumbai. Investors “want to opt out from the other asset classes, and that is always going to be to the benefit of gold,” he said.

Silver futures for September delivery rose $1.444, or 3.8 percent, to $39.327 an ounce on the Comex.

Platinum futures for October delivery advanced $15.30, or 0.9 percent, to $1,771.70 an ounce on the New York Mercantile Exchange. The metal, used mostly in catalytic converters in cars, closed below gold for the first time since December 2008.

Palladium futures for September delivery fell $7.75, or 1.1 percent, to $726.80 an ounce on the Nymex.

To contact the reporters for this story: Debarati Roy in New York at droy5@bloomberg.net; Madelene Pearson in Mumbai at mpearson1@bloomberg.net.

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net.

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