Gold rallied to its ninth record high this year on Tuesday, as growing fears about the spread of the European debt crisis and the increasingly gloomy outlook for the US economy fed a broad investor push into perceived safe-haven assets. US lawmakers averted an unprecedented default on the country’s debt on Monday but the likelihood of the United States losing its top-notch credit rating as a result of its ballooning deficits boosted the likes of gold, the Swiss franc and German government bonds.
Stocks and bonds of the euro zone’s more fragile members came under fire on Tuesday, pushing yields on Spanish and Italian debt to 14-year highs, while Italian authorities held emergency talks and Spain’s economy ministry kept in permanent contact with its European Union counterparts to try to stem the crisis. Spot gold was last up 1.3 percent on the day at $1,638.79 an ounce by 1250 GMT, having touched an all-time high of $1,640.39 earlier in the day, marking its ninth record this year ahead of the vote in the US Senate later to enshrine the last-minute deal on raising the country’s debt limit into law. “There’s a market saying ‘buy the fear, sell the greed.’
Now obviously, people have been buying the fear, certainly for metals and therefore, later today, and early tomorrow in Asia, do you start to sell the greed? I don’t know,” said Credit Agricole analyst Robin Bhar. “The US has averted default, but not averted downgrade, so that’s the driving thought. I would have thought gold would pause for breath and move lower, I thought $1,650 would be the target two or three months down the road,” he said.
