Gold May Climb Toward Record as Global Slowdown Increases Demand for Haven

By Glenys Sim / Bloomberg

Gold traded near an all-time high as investors sought a refuge from depreciating currencies amid concern the U.S. Federal Reserve may provide additional stimulus as the economic recovery falters.

Immediate-delivery gold, which jumped to a record $1,672.80 an ounce yesterday, gained as much as 0.5 percent to $1,669.35, before trading at $1,662.05 at 2:36 p.m. in Singapore. Spot gold has rallied 2.4 percent this week as investors sought haven assets on concern that debt problems in the U.S. and Europe will slow growth. Holdings in exchange-traded products rose to 2,178.467 metric tons yesterday, the highest level ever.

Japan joined Switzerland in taking steps to weaken their currencies as concern the U.S. economy is slowing drove investors toward safer assets including gold, the yen and Swiss francs. Finance Minister Yoshihiko Noda said Japan sold yen, which earlier this week neared a postwar record, a day after the Swiss central bank cut interest rates and said it will boost the supply of francs to curb the “massively overvalued” currency.

“We expect investor flows to remain strong and gold’s uptrend to continue,” said Xin Yi Chen, an analyst at Barclays Capital, which forecasts gold may average $1,560 this quarter. “People are looking for a safe haven and currencies like the franc and yen have also declined recently, so investors have very few places left to put their money.”

December-delivery gold in New York rose as much as 0.3 percent to $1,671.80, after touching an all-time high of $1,675.90 yesterday. Cash silver rallied as much as 0.8 percent to $42.0250 an ounce, matching yesterday’s three-month high.

‘Economic Stimulus’

“Every time we see economic weakness, there will be discussion about more economic stimulus,” said Richard Sichel, who oversees $1.6 billion as chief investment officer at Philadelphia Trust Co. “That could be the case given the fairly weak economic figures we’ve had.”

Reports today and tomorrow may show initial U.S. jobless claims climbed last week, while the unemployment rate remained above 9 percent, according to Bloomberg surveys. There’s a 50 percent chance of another recession, Harvard University economics professor Martin Feldstein, a member of the Business Cycle Dating Committee, said on Aug. 2.

Gold for December-delivery on the Shanghai Futures Exchange rose as much as 0.5 percent to a record 346.99 yuan a gram, while futures on the Tokyo Commodity Exchange surged to the highest level since 1982.

Dollar Rallies

The Dollar Index, a gauge of the U.S. currency’s strength against six major counterparts, rallied as much as 0.6 percent today after Japan intervened. Gold typically moves counter to the dollar.

Gold’s relative-strength index has topped 70 since Aug. 2, a sign that the metal may be set to drop. The price may decline because an influx of speculators has made the rally too “hot,” according to analyst David Hightower of the Hightower Report.

The metal may slump to $1,600 in the near term as some investors view the rally as overdone, Hightower said in an interview yesterday. After falling, prices may rebound to $1,730 by the yearend as investors seek a haven.

Spot platinum declined 1.2 percent to $1,760.50 an ounce and palladium dropped 1.2 percent to $786 an ounce.