Gold flat but Europe debt worry seen supporting

By Frank Tang and Maytaal Angel

NEW YORK/LONDON (BestGrowthStock) – Gold was largely flat on Monday after a rally to record highs in the previous session, but jitters that a European rescue could be too late to stop the spread of a debt crisis provided safe-haven demand.

Platinum and palladium tumbled on the back of industrial metals’ broad decline led by copper’s 6 percent slide. A closely watched industry report, however, said rising investment could take platinum to $2,000 an ounce in the next six months.

“We’re seeing other markets suffering heavy losses and that could cap gold in the short term because there is a tendency to release profitable positions to pay for nonprofitable ones,” said Ole Hanson, analyst at Saxo Bank.

U.S. stock markets lost about 1 percent, while the commodity complex also dropped sharply as crude oil dropped to $70 a barrel.

Safe-haven play due to economic uncertainties should keep the yellow metal firm, analysts said.

“The momentum is with gold at the moment and, unless the market takes a different view of the euro zone debt crisis, we’ll remain supported,” Hanson said.

Spot gold was at $1,227.85 at 2:36 p.m. EDT versus $1,230.05 late in New York on Friday, having earlier hit a day high of $1,242.10, just shy of Friday’s all time high of $1,248.95.

U.S. June gold futures settled up 30 cents at $1,228.10 an ounce.

COMEX open interest dropped below 590,000 lots as of May 14 but still held near an all-time set on May 13, indicating rising price volatility, traders said.

Volatility in the currency markets also boosted gold. Gold priced in euros and sterling struck a record high overnight as did gold futures in Shanghai.

The euro fell (Read more about the trembling euro. ) against the dollar on Monday, at one point slipping to a four-year low, on persistent fears euro zone austerity measures will cause a downturn in the region and stifle global growth.

Gold usually trades in step with the euro and counter to the dollar as it is seen as an alternative asset to the U.S. currency. However, the metal has recently been bought as a safe haven asset and hedge against currency volatility.


Holdings of the world’s largest gold-backed exchange-traded fund, SPDR Gold Trust, rose to a lifetime high of 1,214.065 tonnes as investors sought a safe haven from volatile currencies and declines in stock markets.

Despite a $1 trillion rescue package for euro zone states, investors still doubt fiscally weaker nations can improve their finances, or do so without stunting overall growth in the region, analysts said.

“There’s still very good support for gold. The current bailout is just a sweetener. We’ll need to wait and see whether they put in place actual measures to prevent eventual default,” Standard Bank analyst Walter de Wet said.

In other precious metals, silver was down at $18.92 an ounce versus $19.25, platinum fell to $1,661.50 versus $1,715.50 while palladium dropped to $501.50 versus $523.50.

Weighing on the platinum group metals, which are used to make auto-catalysts, was news that new European car sales fell for the first time in 10 months in April.

Johnson Matthey said in an annual report released earlier that rising investment may take platinum to $2,000 an ounce in the next six months while palladium could hit levels not seen since 2001.

Stock Investing

(Reporting by Frank Tang and Maytaal Angel; Editing by Lisa Shumaker)

Gold flat but Europe debt worry seen supporting