Gold Climbs to Record as U.S. Debt Talks Stall
Bloomberg
Copper, oil and grains declined while gold climbed to a record as a lack of progress in raising the U.S. debt ceiling boosted concern that the U.S. may default, hurting industrial commodities and foodstuffs and boosting demand for a haven.
Immediate-delivery gold gained as much as 1.4 percent to $1,624.07 an ounce and traded at $1,613.20 by 10:21 a.m. in Singapore. Copper on the London Metal Exchange declined as much as 0.4 percent to $9,636 a metric ton. Crude for September delivery fell 1 percent to $98.86 a barrel on the New York Mercantile Exchange. The U.S. is the biggest consumer of crude oil and the second-largest user of copper.
House Speaker John Boehner told Republicans that there’s no agreement on a plan for raising the ceiling before a default threatened for Aug. 2. The impasse has boosted the chance Standard & Poor’swill cut the U.S. credit rating from AAA within three months to 50 percent, the company said July 21.
“We see classic risk-off mode and they’ll certainly be selling commodities, gold the exception,” said Paul Deane, an economist at Australia and New Zealand Banking Group Ltd. in Melbourne.
Investors boosted gold holdings in exchange-traded products to a record 2,122.6 tons last week as European policy makers met for the second time in a month in a bid to calm Greece’s financial distress and inoculate Spain and Italy from contagion.
The S&P GSCI Index of 24 commodities dropped 0.7 percent and the MSCI Asia Pacific Index lost 0.8 percent. The Dollar Index, a six-currency gauge of the dollar’s value, declined as much as 0.3 percent.
Credible Solution
A Republican congressional official said Boehner, speaking by telephone to lawmakers, is reporting that discussions are continuing on raising the $14.3 trillion debt ceiling. Standard & Poor’s said in a report that even if Congress raises the limit in time to avert a default, it might lower the U.S. AAA sovereign credit rating to AA+ with a negative outlook if a deal isn’t accompanied by a “credible solution” on the debt burden.
“EU resolve on Greece shifts market focus to stalled U.S. debt-ceiling talks, which gold pricesare likely to track,” James Steel, an analyst at HSBC Securities USA Inc., wrote in a note dated July 22. Still, “a sudden agreement on the debt ceiling is always possible, and we would expect gold to react quickly and negatively to any such news,” Steel said.
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