Gold Price Today: Global debt jitters push gold past $1600 - GOLD soared above $1600 for the first time yesterday as nervous investors piled into the safe-haven metal amid deepening debt worries in Europe and the US.
The price jumped as high as $1607,45/oz in London as the precious metal extended its recent record-breaking surge.
Bullion has gained 8% in 11 days as US President Barack Obama and Congress have failed to reach an agreement to raise the $14,3-trillion US borrowing limit. With the clock ticking towards an August 2 deadline, investors have turned to gold at the expense of riskier assets such as equities and commodities.
The gold price is now enjoying its longest winning streak in more than 90 years, helped by growing uncertainty over the US economy and a standoff in Europe over proposals to bail out Greece’s economy and prevent contagion spreading across the euro zone.
Benefiting from the higher gold price and weaker rand, all the major miners of the precious metal traded higher on the JSE yesterday. AngloGold Ashanti , Africa’s biggest gold miner, rose 2,4% to reach its highest level since the beginning of June. Gold Fields , the second-biggest, also traded above June levels, up 2,5%. A weaker rand benefits miners as they sell the product in dollars.
Faced with rising labour, electricity costs and working in some of the world’s deepest and most dangerous mines, SA’s gold companies have been trying to ramp up production to benefit fully from the rally in gold.
Yesterday, European government officials and commercial bankers struggled to reconcile competing proposals for a second bail-out of Greece, just three days before a summit meeting called to prevent the crisis from spreading through the region.
French government spokeswoman Valerie Pecresse said she believed the summit of the euro zone’s 17 national leaders scheduled for Thursday in Brussels would agree on a rescue of Greece, supplementing a €110bn bail- out launched in May last year.
But after three weeks of preparatory talks, it was unclear how a consensus could be reached on a way for private owners of Greek government bonds — banks, insurers and other investors — to contribute to the bail-out by taking cuts in the face value of their holdings.
The euro-zone summit on Thursday is the second in a month as the crisis worsens, driving bond yields to euro-area records across the region. Italy and Spain are both paying close to 6% to raise 10-year funds from the market, compared with 2,7% for Germany, Europe’s largest economy.
Emerging-market currencies and equities "are vulnerable as long as the Europeans continue to fiddle with their debt issue", a Stanlib analysts report said.
"The euro mess makes an inflation scare much less credible and deflation again becomes much more likely. This ought to suggest less pressure on gold, but investors are nervous about the euro, and so gold, an asset not backed by any government promise, offers relative safety," Madalet Sessions, an investment analyst at BoE Private Clients, said. "I think the trouble in Europe shows monetary independence combined with prudent fiscal and monetary policy offers a vastly superior risk-reward profile to investors."
The rand has weakened to its lowest level against the dollar since May 26, shedding as much as 1,7% to R6,99/$. The euro, which accounts for about 35% of the South African Reserve Bank’s trade-weighted index in a basket of 15 currencies, slid the most against the dollar in a week.
Emerging-market currencies "overall" remain in a far better fiscal position than their developed market counterparts, Bidvest Bank said in a note.
"Do not be surprised to see any rand weakness as being short-lived."
Across the Atlantic, Mr Obama is pressing congressional leaders for a multitrillion-dollar agreement in deficit-cutting talks as negotiators near the deadline for raising the debt limit.
Europe and the US’s debt problems were playing into gold’s rally, Paul Walker, head of GFMS, said. "The way things are going, it (the gold price) will be sustainable for quite some time," Mr Walker said.With Bloomberg, Reuter.
Global debt jitters push gold past $1600, Gold Price Hits New Record, What Does the Price of Gold Signify?
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