Gold Advances a Seventh Day on European Growth Concern, Stocks


By Nicholas Larkin and Gavin Evans

June 1 (Bloomberg) -- Gold rose for a seventh day in London as the threat to growth from Europe’s sovereign debt crisis and declining equity prices spur demand for gold as a haven.

The euro slid against the dollar amid concern that mounting writedowns at Europe’s banks and efforts to reduce budget deficits will hamper the region’s economic recovery. European equities declined as China’s manufacturing growth slowed.

“The fear factor is still in the marketplace and fleeing to gold is due to its safe-haven properties,” said Bayram Dincer, a commodity analyst at LGT Capital Management in Pfaeffikon, Switzerland. “Investors will likely reduce equity exposure which makes gold investment a reasonable alternative.”

Gold for immediate delivery added $6.40, or 0.5 percent, to $1,222.60 an ounce at 9:56 a.m. in London. Bullion for August delivery was 0.7 percent higher at $1,224.10 on the Comex in New York.

Comex floor trading was closed yesterday for the Memorial Day holiday in the U.S. Yesterday’s electronic trades will be combined with today’s transactions for settlement purposes.

Europe’s “got some deep structural issues that aren’t going to be solved any time in the near-term,” said Toby Hassall, a commodity analyst at CWA Global Markets Pty in Sydney. “So you’ll have a camp of investors out there that believe that things might get worse and they’re continuing to put a bid under gold.”

The metal climbed to a record 1,422.509 Swiss francs an ounce today.

More Writedowns

Gold climbed to a record $1,249.40 an ounce on May 14 and gained 9.2 percent the last two months on concern European measures to cut deficits and contain sovereign debt risks will curb growth in the region. The European Central Bank said in its bi-annual Financial Stability Report yesterday that euro area banks may see another 90 billion euros ($110.4 billion) in net writedowns this year on loans and securities.

Holdings in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, reached a record 1,267.93 metric tons on May 27. The fund’s assets were unchanged on May 28, its website showed.

The United Nations Security Council condemned “acts which resulted” in nine deaths during Israel’s raid on ships bringing aid to the Gaza Strip, adding to pressure to end the country’s control of the coastal enclave’s borders.

Diplomatic pressure on Israel is “another theme that might be giving the gold market a bit of support” today, Hassal said.

Among precious metals for immediate delivery in London, platinum fell 0.8 percent to $1,549.50 an ounce. Palladium slipped 1.9 percent to $459.55 an ounce. Silver declined 1 percent to $18.3775 an ounce.

To contact the reporters on this story: Nicholas Larkin in London at nlarkin1@bloomberg.netGavin Evans in Wellington at gavinevans@bloomberg.net
Last Updated: June 1, 2010 05:02 EDT

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