Gold rallies toward all-time high on credit fears

By Frank Tang

NEW YORK (BestGrowthStock) – Gold rallied to less than $10 below its all-time high on Monday, as funds piled in for safety amid choppy currency and equity markets due to ongoing fears about euro zone credit contagion.

Silver also posted its highest gain in a month as short-term traders bought the metal on gold’s coattail, while platinum group metals were mostly unchanged on concerns that stagnant growth in Europe could hurt autocatalyst demand.

Gold rebounded from an early session low of $1,210.15 an ounce on resurgent safe-haven demand, closing in to an all-time high of $1,248.95 an ounce set on May 14.

“We are seeing gold as the ultimate currency because of all of these growing uncertainties surrounding sovereign debt in the euro zone, and the fact that there are very few attractive currencies out there, said Bill O’Neill, partner at New Jersey-based commodity firm LOGIC Advisors.

“It’s a perfect storm for gold.”

Gold was able to rally with light trading volume in U.S. equity markets and no specific news out of the euro zone, analysts noted.

German Chancellor Angela Merkel’s coalition agreed to pursue savings of 11.2 billion euros next year, part of a multi-year package of 80 billion euros to restore investor confidence.

Spot gold was at $1,243.55 an ounce at 3:35 p.m. EDT (1935 GMT), against $1,218.00 late in New York on Friday. Bullion’s 2 percent gain on Monday was its largest percentage gain in almost a month since May 11.

U.S. gold futures for August delivery settled up $23.10, or 1.9 percent, at $1,240.80 on the COMEX division of the NYMEX.

On hourly charts, the price of gold showed a sharp increase in the U.S. morning session after the 50- and 200-day moving averages crossed.

In investment news, holdings of the world’s largest gold-backed exchange-traded fund, New York’s SPDR Gold Trust, dropped for the first time since April 23. Analysts said that some investors took profits after a steady increase in GLD’s holdings. (GOL/SPDR: )

The euro tumbled to a four-year low versus the dollar, breaking below $1.19. European shares were down 1 percent by midafternoon. (FRX/: ) (.EU: )

“It’s just a safe-haven play. In euro terms, gold keeps on making new highs,” said Bruce Dunn, vice president of trading at New Jersey-based Auramet Trading.

Gold denominated in euros hit a record high of 1,042.28 euros an ounce. Euro gold prices have risen about 35 percent so far this year.

Gold has been lifted by volatility in the wider financial markets this year, benefiting particularly from fears over euro zone sovereign debt levels, which have battered the euro.

In other news, long-time technical analyst Robert Prechter told Reuters that the price of gold could drop 40 percent from its all-time high because of bearish technical momentum and deflation due to the European debt crisis.

GLD HOLDINGS FALL

On Monday, spot silver rose to $18.15 an ounce from late Friday’s level of $17.35.

“From a fundamental perspective, silver’s price performance was detached from its underlying supply and demand dynamics last year, and instead robust investor interest led the metal to outperform gold,” said Barclays Capital in a weekly note.

Platinum was at $1,507 an ounce against $1,510, and palladium was at $430 against $423.75, both caught up in selling of other industrial metals.

Stock Market Analysis

(Additional reporting by Jan Harvey in London; Editing by Marguerita Choy)

Gold rallies toward all-time high on credit fears