Gold spiked to another all-time high this week as slumping global stock markets sent investors fleeing for the safe-haven precious metal while industrial commodities dived on the back of a weak demand outlook. World equities took another beating on Friday but after massive losses there were some signs of stabilisation as investors tentatively looked for bargains. Investment bank Morgan Stanley on Thursday warned that the United States and Europe stood dangerously close to recession and that growth in the big emerging economies would be slower than expected.
The bank said a slow European response to the eurozone’s mounting sovereign debt problems and the US political battle over raising its debt ceiling had hit financial markets and eroded both business and consumer confidence. “Our revised forecasts show the US and the euro area hovering dangerously close to a recession — defined as two consecutive quarters of contraction — over the next 6-12 months,” it said in a report. Morgan Stanley cut its global economic growth forecast to 3.9 percent in 2011 from the previous 4.2 percent, and to 3.8 percent from 4.2 percent in 2012, mainly due to the stagnation in advanced economies.
PRECIOUS METALS:
Gold hit a record $1,878.15 an ounce on Friday, capping a record-breaking week as recession fears mounted.
“With the gold price again reaching a record high … and with economic woes seeming to carry on for the foreseeable future, the outlook for gold, in its natural safe-haven mode, is strong,” said Austin Kiddle at bullion broker Sharps Pixley.
Gold, whose twin drivers are investment and jewellery, is regarded by investors as a safe place to park cash in times of economic uncertainty. “There is another air of panic out there in the market. The beneficiary once again of this nervousness has been gold,” noted Spread Co analyst Ian O’Sullivan. Meanwhile, the London-based World Gold Council forecast gold would see sustained demand from key markets India and China this year despite high prices. Global demand for the second quarter to June was 919.8 tonnes, down 17 percent year-on-year, from 1,107 tonnes in the same period last year, as the “remarkably” high European investment seen earlier levelled off. The WGC, an industry body, said gold demand was still healthy, particularly for jewellery, and expects demand to remain strong for the rest of the calendar year, driven by India and China. The 2011 June-end quarter was the second-highest quarterly value ever at $44.5 billion, the WGC added in a report. By late Friday on the London Bullion Market, gold had jumped to $1,848 an ounce from $1,736 the previous week. Silver advanced to $41.98 an ounce from $38.29.
