Gold May Advance as Sovereign-Finance Concern Stokes Demand; Silver Gains
By - May 10, 2011 6:47 PM GMT+0800
Gold may rise for a third day in London as concern aboutEurope’s debt woes spurs demand for precious metals as a protection of wealth. Silver gained.
Standard & Poor’s yesterday downgraded Greece’s credit rating for the fourth time since April 2010, rekindling concern the region’s debt crisis is escalating. Silver extended its rebound after dropping into a bear market last week.
“Economic uncertainties in the monetary union and fears over peripheral debt were returning to the focus yet again,” Andrey Kryuchenkov, an analyst at VTB Capital in London, said in a report to clients. “In the short run, bullion is likely to remain well supported, also helped by physical activity picking up inAsia amid seasonal demand.”
Immediate-delivery gold rose $1.68, or 0.1 percent, to $1,514.43 an ounce by 11:25 a.m. inLondon. Prices declined 4.4 percent last week after climbing to a record $1,577.57 on May 2. Gold for June delivery was 0.8 percent higher at $1,515.20 an ounce on the Comex in New York.
Bullion rose to $1,517.25 an ounce in the morning “fixing” in London, used by some mining companies to sell output, from $1,502 at yesterday’s afternoon fixing. Prices have gained the past 10 years, the longest run of gains since at least 1920.
S&P lowered Greece’s credit rating to B from BB- yesterday, saying that further reductions are possible. Another cut would make Greece the lowest-rated nation in Europe. European Central Bank Executive Board member Lorenzo Bini Smaghi said allowing a euro-area member state to default on or restructure its debt would create more difficulties than it solves.
Silver Rebounds
Silver futures slumped 27 percent on the Comex last week, the worst weekly drop since at least 1975, as investors sold commodities from oil to copper and exchange owner CME Group Inc. (CME) increased the cost of making new speculative positions. The metal slid as much as 34 percent since reaching a 31-year high of $49.845 an ounce on April 25. A bear market is defined by some investors as a decline of 20 percent or more.
Silver for July delivery gained 3.3 percent to $38.335 an ounce on the Comex. The metal for immediate delivery was 1.3 percent higher at $38.3525 in London. Spot prices touched a record $49.79 on April 25.
“The bounce in silver is not too surprising” as there’s “a strong market appetite to buy anything on the dip,” Mark Pervan, commodity analyst at Australia & New Zealand Banking Group Ltd. in Melbourne, wrote in a note. The downgrading of Greece “reaffirms the reason why investors require the safe- haven support of the precious-metals market.”
Silver assets held in exchange traded products fell for a sixth day yesterday, dropping 176.56 metric tons, or 1.2 percent, to a six-month low of 14,191.21 tons, data compiled by Bloomberg show. Gold ETP holdings fell 3.12 tons, or 0.2 percent, to 2,054.64 tons yesterday, data showed.
Palladium for immediate delivery was up 0.6 percent at $733.75 an ounce. Platinum was little changed at $1,796.55 an ounce.
To contact the reporters on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net; Kyoungwha Kim in Singapore at kkim19@bloomberg.net
To contact the editor responsible for this story: Claudia Carpenter atccarpenter2@bloomberg.net
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