Gold rises above $1,100/oz on sovereign risk fears

By Jan Harvey

LONDON (BestGrowthStock) – Gold rose back above $1,100 an ounce in Europe on Monday as rising fears over sovereign debt after a Moody’s report and a currency row between China and the United States prompted buying of the metal as a haven from risk.

Assets seen as higher risk, such as equities, crude oil and industrial commodities like copper, all retreated as risk appetite receded. However, gold edged up 0.6 percent.

Spot gold was bid at $1,102.80 an ounce at 0923 GMT (4:23 a.m. ET), against $1,099.50 late in New York on Friday. U.S. gold futures for April delivery on the COMEX division of the New York Mercantile Exchange rose $1.10 to $1,102.80 an ounce.

Commerzbank analyst Eugen Weinberg said investors had been cheered by the market’s defense of the $1,100 an ounce level last week, adding that a report from ratings agency Moody’s that highlighted burgeoning government debt was also helping prices.

“It is helping the market because if you are looking for security you buy gold,” he said.

“We are not seeing huge flows, but constant flows. As long as interest rates stay at current levels, it also makes the opportunity cost of buying gold relatively low.”

Moody’s Investors Service said on Monday the credit ratings of the world’s four largest triple-A sovereign debt issuers – the United States, UK, France and Germany – and Spain were safe, but risks to their blue-chip status had grown.

“Speculation both the UK and U.S. could lose their AAA-credit ratings should act to underpin the metals, potentially drawing investment demand away from US treasuries,” said James Moore, an analyst at TheBullionDesk.com, in a note.

Chinese premier Wen Jiabao also spooked the currency markets, saying on Sunday the yuan was not undervalued, and rejected international calls to allow the currency to rise.

He also said there was a chance the world economy may suffer a double-dip recession as conditions in some countries remain weak.

DOLLAR FIRMS

The dollar rose broadly on Monday as a drop in stock markets prompted some investors to shy away from riskier assets.

Gold’s resilience in recent months in the face of a rising dollar has underlined the metal’s appeal as a haven from risk as sovereign debt fears in the euro zone and further afield shift to the fore, analysts said.

Traders are awaiting further direction from a welter of U.S. data due later in the session, including industrial production numbers for February, and a Federal Reserve policy setting committee meeting on Tuesday.

The metal ignored a media report that the German finance ministry was considering the possibility of euro zone countries using their central banks’ gold reserves to back a European Monetary Fund, after the Bundesbank said it was unaware of any such plan.

Among other commodities, oil prices retreated, pressured by a stronger dollar and weak U.S. consumer confidence data that boosted concern over weak demand in the world’s top energy user. Base metals were softer.

The other precious metals, which are more industrial in use than gold, retreated in line with other industrial commodities. Silver was bid at $16.95 an ounce against $17.02.

Platinum was at $1,602 an ounce against $1,604.50, while palladium was at $454.50 against $460. The metals are primarily used in autocatalyst manufacturing.

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(Reporting by Jan Harvey; Editing by Keiron Henderson)

Gold rises above $1,100/oz on sovereign risk fears