Gold rises for third day on eurozone debt fears

By Frank Tang

NEW YORK (BestGrowthStock) – Gold rose for a third straight day Wednesday on lingering fears about a sprawling European debt crisis and fund buying in commodities across the board.

The market is also evaluating what appears to be a mixed outlook from Goldman Sachs, which now forecasts gold prices to peak near $1,750 an ounce in 2012 on rising U.S. interest rates amid better economic outlook, even as bullion’s rally is expected to continue in 2011 due to quantitative easing.

The European Central Bank came under pressure on Wednesday to take new steps to stabilize the euro zone in the face of a crippling debt crisis that has stoked contagion fears in the United States and Asia.

“There is still an underlying concern about the development in Europe going forward, which can be reflected in the increase in the prices of credit default swaps in German government debt. Perhaps some people think gold doesn’t look like a bad place for refuge,” said Peter Buchanan, senior economist at CIBC World Markets.

German’s sale of over 4 billion euros in its five-year government debt was met with the worst demand in six months.

Analysts also cited fund buying in the commodities spectrum on the first day of December, as the Reuters/Jefferies CRB index (.CRB: ) rose 2.5 percent, led by crude oil’s sharp rally.

Spot gold rose 0.3 percent to $1,389.21 an ounce at 2:25 p.m. EST (1925 GMT). U.S. gold futures for February delivery settled up $2.20 at $1,388.30.

Silver rose 1.1 percent to $28.37 an ounce.

On what looked set to be a quite day for precious metals, gold turned higher in a knee-jerky rally after a Reuters story said the United States would be ready to support an extension of the European Financial Stability Facility through an extra commitment of money from the International Monetary Fund.

However, a U.S. Treasury spokesman said the United States is not discussing the matter.

U.S. gold and silver volume was softer than usual for a second consecutive day, as most investors have completed rolling over their futures after December’s first notice day on Tuesday.

The precious metal gave up gains in euro and sterling terms, after hitting record highs in both currencies.

Euro-priced gold retreated after earlier hitting a peak of 1,070.11 euros an ounce, an all-time high, while gold in sterling also pared gains after touching a record 895.49 pounds an ounce.

The euro rebounded on Wednesday, snapping a three-day decline, on speculation the European Central Bank may take bold steps to ease the region’s debt crisis at a meeting on Thursday. (FRX/: )

“Gold is like a see-saw on a hot air balloon,” said Mitsubishi Corp analyst Matthew Turner.

“Sometimes the euro end is rising relative to the dollar end, at other times the dollar end is rising relative to the euro end, but if you look around you realize that most of the time both ends are rising in absolute terms.”

Better-than-anticipated economic data in China, Europe and the United States lifted world stocks, while bets the European Central Bank could step up its bond buying program partially offset fears about the euro-zone debt crisis.

Wall Street rose more than 2 percent after data showed U.S. private sector payrolls rose by the biggest amount in three years in November, lifting optimism about the job market ahead of Friday’s key employment report.


Goldman Sachs painted a mixed picture on gold’s outlook. In a Wednesday note, the investment bank said it is prudent for gold investors to begin to protect against downside risk as bullion prices are expected to peak in 2012.

“As we look toward 2012, we find it timely to reiterate our view that at current price levels gold remains a compelling trade, but not a long-term investment,” Goldman said in a note.

On the supply side of the market, the World Gold Council reported that bullion sales under the third Central Bank Gold Agreement have totaled only 20.4 tonnes in the second year of the pact so far, with the bulk of sales made by the International Monetary Fund.

Among other precious metals, platinum rose 1.5 percent to $1,680.50 an ounce, while palladium was the biggest gainer, up more than 5.4 percent to $733.47.

Prices at 2:49 p.m. EST


CLOSE CHG CHG CHG US gold 1388.30 2.20 0.2% 26.6% US silver 28.413 0.201 0.0% 68.7% US platinum 1684.00 17.60 1.1% 14.5% US palladium 732.30 29.30 4.2% 79.1%

Gold 1388.19 3.25 0.2% 26.6% Silver 28.37 0.32 1.1% 68.5% Platinum 1678.24 22.24 1.3% 14.5% Palladium 733.22 37.22 5.3% 80.8%

Gold Fix 1385.50 -6.00 -0.4% 25.5% Silver Fix 28.74 161.00 5.9% 69.2% Platinum Fix 1675.00 2.00 0.1% 14.3% Palladium Fix 716.00 9.00 1.3% 78.1%

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

Gold rises for third day on eurozone debt fears