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Gold May Gain in New York as U.S., Europe Debt Woes Spur Demand

Gold may gain toward a record in New York as debt concerns in the U.S. and Europe spur demand for the metal as a protection of wealth.

Gold futures climbed to a record $1,631.20 an ounce on July 27 and are up for the first month in three amid deadlock between U.S. President Barack Obama and House Republicans over lifting the debt ceiling. Moody’s Investors Service said it may cut Spain’s credit rating. Gold held in exchange-traded products rose to an all-time high yesterday.

“U.S. debt levels will continue to dominate risk and market sentiment in the coming sessions,” James Moore, an analyst at in London, said in a report. “The pace with which dips have recovered reflects the level of safe-haven interest in the yellow metal and the concern investors have of a default by the U.S.”

Gold for December delivery rose $2.20, or 0.1 percent, to $1,618.40 an ounce by 8 a.m. on the Comex in New York. Prices are up 1.1 percent this week and 7.7 percent this month. Immediate-delivery gold was little changed at $1,616.75 in London after reaching a record $1,628.05 on July 27.

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 1.6 percent in 2011, the Standard & Poor’s GSCI Index of 24 commodities is up 9.1 percent and Treasuries returned 3.4 percent, according to a Bank of America Merrill Lynch index.

Debt Limit

U.S. House Speaker John Boehner, falling short of the votes within his own party needed to increase the nation’s debt limit after a night of one-on-one appeals to members, canceled a vote on a plan that Senate leaders pledged to defeat.

The Obama administration will brief the public no earlier than after financial markets close today on priorities for paying the nation’s bills if the $14.3 trillion debt ceiling isn’t raised, a Democratic Party official said. Treasury Secretary Timothy F. Geithner has said options to prevent a default will run out on Aug. 2 if the limit isn’t increased.

“While the threat of a default gets nearer, investors are still fairly confident they will reach a deal over the weekend,” said Huang Wei, an analyst at Huatai Great Wall Futures Co. “Gold might face some pressure as no one really wants to have a big long position with the possibility of an agreement by Monday.”

International Bailout

Moody’s said a possible downgrade for Spain would probably be “limited to one notch.” Spain, the euro region’s fourth-largest economy, is trying to rein in a surge in borrowing costs and convince investors it won’t follow Greece, Ireland and Portugal in seeking an international bailout.

Holdings of the metal in ETPs rose for a fourth day, climbing 19.1 metric tons to a record 2,150.5 tons, data compiled by Bloomberg show.

“It’s not hard to imagine that gold could rise and go through $2,000,” Aaron Regent, chief executive officer of Barrick Gold Corp., the largest producer of the metal, said yesterday. Demand is being driven by the debt crises in the U.S. and Europe, central-bank buying and diversification, he said.

Silver for September delivery in New York was down 0.2 percent at $39.715 an ounce, taking its monthly gain to 14 percent. Palladium for September delivery fell 0.3 percent to $825.50 an ounce and is up 8.5 percent this month. Platinum for October delivery was 0.4 percent lower at $1,785.90 an ounce. It gained 3.5 percent this month.

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