Gold extended its rally to a record above $1,900 as mounting concern that the global economy is faltering spurred demand for bullion as a protection of wealth.
Goldman Sachs Group Inc. lowered its forecast for U.S. growth in 2011 on signs that the recovery in the largest economy lost momentum. German Chancellor Angela Merkel attempted to shut the door on common euro-area bonds as a means to solve the debt crisis, saying she won’t let financial markets dictate policy.
Gold is in the 11th year of a bull market. Prices have more than doubled since the end of 2008 as governments worldwide struggled with debt crises and as record low U.S. borrowing costs boosted the appeal of bullion as a hedge against inflation.
“People are losing confidence in monetary management,” Nick Barisheff, who helps manage $650 million as the president of Toronto-based Bullion Management Group Inc., said in a telephone interview. “Gold has been a form of currency for the last 3,000 years and will continue to be so.”
Gold futures for December delivery gained as much as 1.4 percent to $1,917.90 an ounce and traded at $1,911 at 6:34 a.m. Singapore time on the Comex in New York.
Central banks are adding to their reserves of the metal for the first time in a generation. They have bought 198 metric tons of gold so far this year, Marcus Grubb, the managing director of investment at the World Gold Council, said on Aug. 18.
“Both central banks and individual investors are eying gold as this is the probably the only investment where they do not have to worry about the value being eroded,” Barisheff said.
Holdings in exchange-traded products backed by gold touched 2,216.8 tons Aug. 8, the most ever, data compiled by Bloomberg show. The U.S. Mint’s sales of American Eagle gold coins have totaled 91,000 ounces so far in August, the most since May.
The metal gained 34 percent this year. The MSCI All-Country World Index fell 12 percent, the Standard & Poor’s GSCI Index of 24 commodities rose 2.3 percent, while Treasuries returned 7.7 percent, a Bank of America Merrill Lynch index showed.
“I would say that we will reach $2,000 by the end of this year and higher levels over the years,” Louise Yamada, managing director of Louise Yamada Technical Research Advisors LLC in New York, said in a telephone interview.