Gold rebounds as safe-haven buying returns

By Frank Tang

NEW YORK (BestGrowthStock) – Gold rebounded from one-week lows on Wednesday, as risks that a euro-zone debt crisis may spread beyond Greece fueled a flight to safety in the wake of currencies volatilities and equities losses.

Precious metals with strong industrial demand components including silver, platinum and palladium all posted their biggest two-day losses since early February due to fears about a global economic slowdown sparked by possible sovereign debt defaults.

“The market is so uneasy right now because the news coming out of the European Union continues to be contradictory. People are moving from the fiat currencies into the hard safe-haven asset which is gold,” Michael Daly, gold specialist at futures broker PFGBest.

The usual positive correlation between gold and euro is showing signs of breaking down in the past two weeks, as the single currency has plummeted 5 percent to below $1.29 for the first time in more than a year. (FRX/: )

Daly said that the correlation would remain weak as long as the euro situation remained unstable.

Spot gold was at $1,173.35 an ounce at 2:27 p.m. EDT (1827 GMT) against $1,170.65 late in New York on Tuesday. U.S. June gold futures on the COMEX division of the NYMEX settled up at $5.80 at $1,175 an ounce.

Protests against the Greek government austerity measures in Athens killed three people, while credit agency Moody’s said Portugal was on review for a possible downgrade.

Money markets in Europe are showing signs of strain as fears of contagion from the Greek crisis renew worries about the banking system’s health but the current chill is far from the interbank freeze at the height of the credit crunch.

“We think the flight to safety will continue, and we expect to see more inflows into physical gold products like exchange-traded funds,” said Commerzbank analyst Daniel Briesemann.

Investment interest held firm, with holdings of the world’s largest gold-backed exchange-traded fund, New York’s SPDR Gold Trust, still at a record high on Tuesday.

“Gold is actually holding up remarkably well in the face of what is a very strong dollar move against the euro,” said RBS analyst Daniel Major. “The market as a whole is running scared, and it is safe-haven buying that is supporting gold.”

Gold’s underlying strength can be seen by its rallies against non-U.S. currencies. The metal rose to all-time highs in euro and Swiss Francs terms on Wednesday.

Gold hit a record high of $1,226.10 last December.


The more industrial precious metals — silver, platinum and palladium — slipped sharply in line with losses in other commodities on fears that a widening debt crisis could trigger global economic slowdown.

Palladium fell as much as 6 percent to its session low of $480 an ounce, its weakest level since April 1, and was later at $503.50 against $515.50.

Platinum hit its weakest since March 31 at $1,618.50 and was later at $1,641 an ounce versus $1,668.50. Silver fell to its lowest since late March at $17.05, and was later at $17.42 an ounce against $17.84.

Stock Market Research

(Additional reporting by Jan Harvey, Michael Taylor and Pratima Desai in London; Editing by Lisa Shumaker)

Gold rebounds as safe-haven buying returns