Gold May Gain for Second Day as Europe Crisis Fuels Haven Demand

Gold may advance as concern over Europe's financial crisis grows. The growing crisis increases investor's demand for a safe haven asset. According to one expert, gold is a standout investment whether from a risk perspective or a long-term perspective.

By Glenys Sim
June 25, 2012
Businessweek

Gold may advance, paring the worst quarterly drop since the collapse of Lehman Brothers Holdings Inc., as concern that Europe’s debt crisis is escalating increases haven demand.

Spot gold was little changed at $1,572 an ounce at 2:17 p.m. in Singapore. Bullion has dropped 5.8 percent since the end of March, the worst quarterly performance since the three months to September 2008, as the dollar rallied 4.2 percent against a six-currency basket including the euro. The metal also fell this quarter as the Federal Reserve last week extended a program of replacing short-term bonds with longer-term debt through the end of 2012, without announcing further debt purchases.

German data today may signal weaker consumer confidence, before Italy and Spain auction securities tomorrow. Countries need growth, not austerity, to repay debt, billionaire investor George Soros said in a Bloomberg Television interview. European Union leaders convene for a two-day summit from June 28.

“Gold remains a standout investment, whether from a risk perspective now, or from a longer-term perspective when governments around the world are going to have to deal with rampant inflation,” said Gavin Wendt, founding director and senior resource analyst at MineLife Pty. “It’s incongruous that at a time of heightened financial uncertainty that gold should have been subjected to the sell-off that we’ve witnessed.”

Cash gold is still 0.5 percent higher this year as investors sought to protect their wealth against weakening currencies and financial-market turmoil. Since the end of March, the Standard & Poor’s 500 Index dropped 5.2 percent, the S&P GSCI Index of commodities lost 17 percent and the euro slid 6.1 percent against the dollar.

Gold ETPs

August-delivery bullion gained as much as 0.7 percent to $1,577.30 an ounce on the Comex in New York, before trading at $1,572.60. Holdings in the SPDR Gold Trust, the biggest exchange-traded product backed by bullion, stood at a four-week high of 1,281.6 metric tons on June 22, unchanged since June 18, the company’s website showed.

Spot silver lost as much as 0.9 percent to $26.66 an ounce, and traded at $26.865. One ounce of gold bought as much as 58.9186 ounces of silver today, the most since September, according to Bloomberg data. The metal used mainly in industrial applications is 17 percent lower since the end of March, also poised for its worst quarterly loss since the three months to September 2008.

Cash platinum was little changed at $1,438.65 an ounce, after swinging between gains and losses. The metal used mainly in autocatalysts has fallen 12 percent this quarter, set for its worst quarter since the period to September 2008. Palladium climbed 0.2 percent to $610.78 an ounce, poised for a second quarterly loss.

To contact the reporter on this story: Glenys Sim in Singapore at gsim4@bloomberg.net

To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net

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