GOLD NEWS

Another new gold record, SPDR Gold Trust holdings at 6-month high

Weak US economic data suggesting QE3 more likely coupled with continuing pressure on struggling Eurozone economies and the U.S. debt ceiling impasse all combined to push spot gold to a new intraday record

Author: Frank Tang
Posted: Friday , 29 Jul 2011

NEW YORK (Reuters) - 

Gold hit another all-time high on Friday as investors sought a safe haven, after anemic U.S. growth data raised the prospect of recession if a deadlock over Washington's debt fails to be resolved quickly.

Gold volatility climbed as President Barack Obama told U.S. lawmakers a deficit-reduction plan being advanced by the top Republican in Congress would be defeated in the Democratic-led Senate. The metal could tumble if a debt-ceiling deal eases fears in other financial markets, analysts said.

Bullion hit its third record in five days, set to rise around 9 percent for July, after Friday's GDP data showed the U.S. economy stumbled badly in the first half of 2011 and came dangerously close to contracting in the January-March period.

"The weak economic data suggests that you may see some form of stimulus, certainly highly accommodative monetary policies, and that will continue to put a bid on gold prices," said Mark Luschini, chief investment strategist of broker-dealer Janney Montgomery Scott, which oversees $54 billion in assets.

"As long as there is no re-normalization of a steady state of economic or fiscal circumstances, gold will move higher."

Spot gold touched an all-time peak of $1,632.30 an ounce, and was up 0.4 percent at $1,623.30 by 11:21 a.m. EDT.

The U.S. December contract gained $9.70 at $1,625.90 an ounce. Futures volumes were relatively low as most investors had completed contract rollover ahead of the August contract's first-notice day on Friday.

Silver rose 0.5 percent to $39.87 an ounce, but was off a more than two-month high of $41.42 hit this week. It is set to post a gain of around 15 percent for July, its best month since April.

The CBOE Gold ETF Volatility Index, which is often referred to as the "Gold VIX" and is based on SPDR Gold Trust options, rose to its highest in over two months, driven by gold's rally and expectations of a swift pullback if a deal over the U.S. debt ceiling is reached.

Investor unease can be seen in the holdings of the world's largest gold-backed exchange-traded fund, SPDR Gold Trust, which rose 1.5 percent on Thursday from a day earlier to a six-month high of 1,262.98 tonnes.

EURO FEARS UNDERPIN

Debt troubles in the euro zone were also on investors' radar screens, after ratings agency Moody's put Spain on review for possible downgrade, raising fears of an escalation of the debt crisis in some of the region's bigger economies.

"So far neither Europe nor the U.S. have demonstrated an ability to ensure long-term fiscal sustainability," said Nic Brown, analyst at Natixis.

Labor strife in South Africa was being closely watched by the market, with talks to resume on Monday between gold mine workers and the major producers aimed at ending a strike.

The impact of supply outages -- particularly short-term ones -- on gold is usually fairly soft, given the availability of above-ground stocks.

Spot platinum was down 25 cents at $1,781.50 an ounce. Palladium added 0.2 percent at $825.25 an ounce, heading for a monthly rise of nearly 10 percent, its biggest this year. Prices at 11:21 a.m. EDT (1521 GMT)

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