LONDON – Gold prices rose above $1,400 an ounce on Monday for the first time in nearly seven weeks as violence flared in North Africa and the Middle East, boosting interest in the precious metal as a haven from risk. Tensions have spread across the regions from Egypt and Tunisia, where protests have unseated leaders over the past month or so, threatening the grip of long-entrenched autocratic leaders elsewhere.
Spot gold rose as high as $1,403.38 an ounce and was bid at $1,402.80 an ounce at 1454 GMT, against $1,388.58 late in New York on Friday. US gold futures for April delivery raised $15 an ounce to $1,403.60, having peaked at $1,404.30. Gold priced in euros hit its highest since January, 18 at 1,027.21 euros an ounce and sterling-priced gold its’ highest since January, 14 at 865.33 pounds an ounce.
Dozens of people were reported killed in Tripoli overnight as anti-government protests reached the Libyan capital for the first time and the building where the country’s parliament meets was ablaze. The Libyan uprising is one of a series of revolts that have spread across the Arab world since December, threatening entrenched dynasties from Bahrain to Yemen.
“The unrest and the fear in these countries is increasing,” said Bayram Dincer, an analyst at LGT Capital Management in Switzerland. “These uncertainties on the geopolitical risk side are driving the gold market.”
“See how easily gold broke $1,390, $1,395, which was at strong resistance levels, and now the $1,400 psychological level,” he said. “It seems nobody is looking for lower gold prices.”
The protests have pushed gold higher even as interest in investment products like exchange-traded funds stayed soft. Holdings of the world’s largest gold exchange-traded fund, New York’s SPDR Gold Trust, fell to a nine-month low on Friday at 1,223.1 tonnes, data from the fund showed. “If (buying) is not through the exchange-traded funds or a clear change in the net long on Comex, it is most likely to be through the physical market – coin and small bar buying,” said Daniel Major, an analyst at RBS Global Banking Markets.
“I potentially wouldn’t rule out larger purchases by high net worth individuals on the back of the unrest we’re seeing.”
SAFE-HAVENS RISE: Risk aversion on the back of the protests sparked wider buying of assets seen as a haven from risk. Bund futures rose as tension in Libya sparked haven flows into German debt, while the Swiss franc rose against the dollar and euro. Brent oil prices meanwhile surged nearly four percent to 2-1/2 year highs as traders eyed unrest in major producer Libya. European shares slipped in response to the tensions, as investors cut exposure to risk.
Other precious metals also rallied, with silver touching its highest in 31 years and palladium a 10-year peak. Silver outperformed gold, with the number of silver ounces needed to buy an ounce of gold dropping to around 42, a near 13-year low. “Precious metals continued to recover as civil unrest intensified in the MENA region, with silver touching levels not seen since the peak of the Hunt Brothers squeeze in 1979/80,” said Morgan Stanley in a note.
“We expect the combination of continued strength in investment demand and a sustained industrial demand recovery will support silver… this year before easing amid improved economic conditions in 2012.” Silver hit a high of $33.59 and was later at $33.52 an ounce against $32.46. Platinum was at $1,845.49 an ounce against $1,833.50, while palladium peaked at $859 and was later at $857.22 against $848.25.
