Gold is back on the rise on concern that the debt crisis in Europe will threaten economies and boost demand for safe haven investments. The latest drop in gold is seen as a correction and will only last temporarily because once people realize that the problems haven't gone away, they will go back to gold.
By Debarati Roy and Nicholas Larkin
Sep 16, 2011 7:07 AM MT
Gold rose the first time in three days in New York on renewed concern that Europe’s debt crisis will threaten economies, boosting demand for a haven.
The euro fell, snapping a two-day rally against the dollar, on speculation that European leaders meeting today haven’t taken sufficient steps to contain the region’s fiscal woes. Before today, gold jumped 25 percent this year, reaching a record $1,923.70 an ounce on Sept. 6, on mounting signs the global economy will slow.
“People realize that the background problems have not disappeared, and the crisis in Europe has not been resolved,” William O’Neill, a partner at Logic Advisors in Upper Saddle River, New Jersey, said in a telephone interview.
Gold futures for December delivery rose $15.30, or 0.9 percent, to $1,796.70 on the Comex at 10:04 a.m. in New York.
Prices are still heading for a weekly drop of 3.4 percent, which would be the biggest such loss since early May. Yesterday, the European Central Bank said it will coordinate with other central banks to ensure euro-area lenders have enough dollars.
“We view the latest correction in gold as temporary,” Michael Lewis, the head of commodities research at Deutsche Bank AG in London, said in a report today. Prices “will keep on rising in an environment where concerns toward the global banking system remain.”
Eighteen months of crisis-fighting and 256 billion euros ($352 billion) in aid for Greece, Ireland and Portugal have failed to stabilize markets as the turmoil spread to Italy and Spain.
“They’re only really geared to put out spot fires and play brinkmanship, rather than to deliver a killer package that will actually resolve all their issues,” Tom Price, an analyst at UBS AG, said by telephone from Sydney. “In that environment, the problem drags on for years, not months, and it’s a great environment for gold.”
Silver futures for December delivery rose 75.9 cents, or 1.9 percent, to $40.26 an ounce on the Comex. Prices are still heading for the second straight weekly loss.
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