Gold hits 8-week high as data shows flagging growth

By Frank Tang

NEW YORK (BestGrowthStock) – Gold rose for a second day on Wednesday to an eight-week high above $1,240 an ounce, as investors turned to bullion as a safe haven after bleak U.S. new home sales and durable goods data stirred double-dip recession worries.

The metal’s trend has been rising since it hit a low at $1,160 on July 18, boosted by a spate of weak economic data and after the Federal Reserve downgraded its economic outlook.

Gold is about $20 below from its all-time high at $1,264.90 set on June 21.

Gold was boosted by continuing fears after data showed new U.S. home sales slumped to the slowest pace on record in July and orders for costly durable goods were weak, said Adam Klopfenstein, senior market strategist at MF Global’s unit Lind-Waldock.

“Until we get some type of conclusion of where the economy is going, gold is going to be well supported,” he said.

Silver and platinum group metals climbed on gold’s strength, and as the S&P 500 index (.SPX: ) ended higher, snapping a four-day losing streak due to technical support and bargain hunting. (.N: )

Spot gold was at $1,240.80 an ounce at 3:47 p.m. EDT (1947 GMT), against $1,229.25 late in New York on Tuesday. U.S. gold futures for December delivery settled up $7.90 at $1,241.30, while gold priced in euros and sterling also hit multi-week highs.

Gold is benefiting from renewed investor demand for safe-haven assets as evidence of a stalling economy recovery mounts, which in turn has pushed global equities to their lowest since early July, when a recovery in risk appetite led prices to retreat from June’s record highs.

“This recent leg-up and the quite significant move yesterday post the U.S. housing data is perhaps that trend of safe haven inflows into gold resuming,” said RBS analyst Daniel Major.

Spot bullion rallied to a high of $1,241.35 an ounce.

Industrial commodities also fell, as copper, a barometer of economic activity, hitting its lowest in a month. (MET/L: )

Gold investors took heart after euro swung back into positive territory against the dollar after the weak U.S. data, having earlier come under pressure on worries about widening peripheral sovereign bond spreads after the previous day’s downgrade of Ireland’s credit rating. (FRX/: )

Gold’s strength could be also seen when priced in non-U.S. currencies.

Gold priced in euros hit its highest since July 1 at 981.61 euros an ounce against its previous close at 973.59 euros. Sterling-priced gold reached its highest since mid-July at 803.91 pounds.

INVESTMENT FIRM

A report released by World Gold Council, an industry-sponsored trade group, suggested further support for bullion prices.

The WGC said in its quarterly demand trends report on Wednesday that India and China were likely to provide the main thrust to demand growth this year and predicted investment demand would stay strong.

WGC reported burgeoning bullion investment in the second quarter, notably from Europe, seat of the euro zone sovereign debt crisis. Demand for gold exchange-traded funds quintupled in the quarter, it said.

Investment demand for gold has increased in recent sessions, with holdings of the world’s largest gold-backed exchange-traded fund, the SPDR Gold Trust, rising by nearly 13 tons last week, its biggest one-week climb since early June. (GOL/SPDR: )

Physical gold demand also tends to rise in August as jewelers stockpile inventory ahead of the start of India’s festival season, which starts with Raksha Bandhan on August 24 and extends until Dhanteras in November, the biggest gold-buying day.

Spot silver rose 3 percent to $18.89 an ounce from $18.34 on strong investment demand, extending gains after posting its biggest one-day rise in more than three weeks on Tuesday, echoing the climb in gold prices.

Platinum was at $1,523.50 an ounce against $1,510, while palladium was at $491.50 against $482.50.

(Additional reporting by Jan Harvey in London; Editing by Lisa Shumaker)

Gold hits 8-week high as data shows flagging growth