July 12, 2011 6:38 pm
Gold attains fresh record in euro and sterling
By Jack Farchy in London
Gold prices leapt to within reach of a new record peak on Tuesday as the eurozone crisis once again convulsed global markets and burnished the appeal of bullion.
The precious metal rose to a high of $1,566.36 a troy ounce by early afternoon in New York, a level only surpassed on two occasions and approaching the nominal record of $1,575.79 touched in April.
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The rally came in spite of a jump in the value of the dollar. Gold also touched fresh records in euro and sterling terms. It rose to €1,118.58 a troy ounce as concerns over contagion in the eurozone caused a slide in the value of the single currency at the same time as driving investors to gold. It is up 9.1 per cent in euro terms since the start of last week. In sterling terms, the metal touched a new record of £982.84.
James Steel, precious metals strategist at HSBC, said the surge in prices “provided evidence of the strength of the bull market, in our view, and confirmed that the rally is not just a function of US dollar weakness”.
Edel Tully, precious metals strategist at UBS, said confidence was beginning to build that the gold price could hold above the $1,550 level.
While physical demand has fallen in price-sensitive countries such as China and India, western investors have started to return to the market.
Ms Tully noted that coin demand in Europe had “started to perk up” – recalling last summer, when concerns over the impact of the eurozone’s measures to prop up the Greek economy triggered a wave of physical gold buying by European investors.
Many hedge fund investors remain wary of buying at near-record prices, however, holding the metal back from an even stronger surge. Traders said that the risk aversion that had been triggered by the spread of eurozone concerns to Italy had encouraged some investors to bet on gold’s outperformance relative to other precious metals.
The ratio of the price of silver to that of gold has risen from 1:42 last week to 1:44 on Tuesday, while gold is trading at its highest level in more than two years relative to platinum.
“This year, across the complex, it is gold that has seen the most stable interest,” said Suki Cooper, precious metals analyst at Barclays Capital.
“The escalation of European sovereign debt uncertainty and concerns over inflation amid low interest rates continue to set a favourable backdrop for gold,” she added.
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Copyright The Financial Times Limited 2011
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