Gold hits 2010 high but safe-haven demand eases

By Frank Tang

NEW YORK (BestGrowthStock) – Gold futures rose on Wednesday, hitting a 2010 peak after Standard & Poor’s downgraded Spain’s debt, but safe-haven buying fizzled as other global markets strengthened, pulling the precious metal off session highs.

Analysts said fears about sovereign credit default subsided after the Federal Reserve offered a more upbeat view of the U.S. economy, left interest rates near zero and promised to keep them low for an extended period.

Bruce Dunn, vice president of trading at New Jersey-based Auramet Trading, said gold came off session highs on improving economic sentiment due to a better equities market and the Fed’s policy statement.

Earlier, S&P cut its ratings on Spain one notch to AA from AA-plus, citing a more protracted period of sluggish growth than previously expected.

“Gold has clearly become the safe haven as people don’t know where to put their money anymore. The metal is not based on currencies anymore, but rather which country is going to be the next downgrade,” Dunn said.

During the session, gold hit record highs when priced in euros, sterling, Swiss francs. It rose to its highest level in yen terms since 1983.

Spot gold rose to a high of $1,174.18, the loftiest level since December 4. It was at $1,166.65 an ounce at 3:54 p.m. EDT (1954 GMT), against $1,168.03 late in New York on Tuesday.

U.S. gold futures for June delivery on the COMEX division of the NYMEX settled up $9.60 at $1,171.80 an ounce.

A day earlier, S&P cut its ratings on Greece to junk status and also slashed Portugal’s.

“This kind of nervousness should be supportive for gold,” said Societe General analyst David Wilson. “It is exactly the sort of environment gold thrives in. It has come back to being that safe haven that we saw at the beginning of last year.”

The euro fell (Read more about the trembling euro. ) to a one-year low at about $1.32.

Concern over smaller euro zone economies has boosted gold but pressured the euro this year, weakening the traditional relationship between the two.

OTHER METALS UNDER PRESSURE

Gold’s nearly 7 percent gains this year have come largely on the back of rising sovereign risk, analysts said.

On technical charts, a reverse head-and-shoulder pattern in gold signals the metal’s next move should be a test upward to a record high at $1,240 an ounce, analysts said.

Other precious metals such as silver, platinum and palladium, which are more industrial in use than gold, succumbed to selling pressure, however.

Platinum hit its lowest in a week on Wednesday at $1,695 an ounce. It was last at $1,705.50 an ounce against $1,715.50 late on Tuesday.

Palladium was at $537 an ounce against $545.50, while silver was at $18.07 against $18.14.

Stock Money

(Additional reporting by Chris Kelly in New York, Jan Harvey in London; Editing by David Gregorio)

Gold hits 2010 high but safe-haven demand eases