PRECIOUS: Gold Reaches New Record Amid Resurgence of Euro Zone Fears, Reports Reuters

Gold and Palladium Prices Surge Amid Euro Zone Debt Concerns and G20 Anticipation

• Traders set sights on $1,475 per ounce for gold
• Palladium rises for the fifth consecutive day

Gold prices reached all-time highs for a fourth consecutive day as worries about the debt levels of various euro zone countries fueled safe-haven purchases. On the other hand, palladium experienced a notable rally for the fifth day in a row.

Silver prices climbed to $28.90 per ounce, marking the highest level since March 1980. Palladium reached $732.50 per ounce, its peak since April 2001, while platinum rose to $1,795.50, the highest since July 2008.

At 1540 GMT, spot gold recorded a price of $1,422.30 per troy ounce, with bids at $1,419.50, up from $1,409.09 late in New York on Monday. U.S. gold futures also peaked at $1,422.10 per ounce.

Analyst David Thurtell from Citi commented, "European investors are worried about the euro, real rates are very low and likely to remain low for the foreseeable future, so the opportunity cost of investing in gold is minimal. There are numerous reasons to buy and few to sell."

Investor concerns regarding the financial stability of Ireland and Portugal have caused the premiums demanded for their government debt to spike. This uncertainty has also put downward pressure on the euro against the yen while moderating its gains against the U.S. dollar.

Thurtell added, "Given the fears surrounding peripheral European nations like Ireland, there is a protective factor influencing investors."

Gold priced in euros has surged over 7% over the past five trading days, reaching its highest point since late June.

Concerns Over Inflation

"Currently, we are witnessing a blend of inflation concerns, uncertainty in currency markets, and doubts about the financial resilience of certain nations," stated Alexander Zumpfe of Heraeus Metals. He highlighted that comments from World Bank President Robert Zoellick about possibly reinstating a modified gold standard have reignited interest in gold.

Fears about rising prices were further amplified by the U.S. Federal Reserve’s recent decision to initiate additional monetary policy easing measures aimed at stimulating growth in the nation’s economy. The announcement of a $600 billion bond-buying program initially weakened the dollar and caused commodity prices, particularly gold, to surge, contributing to nearly a 30% increase in gold prices year-to-date.

Investor demand, which had recently waned, is showing signs of recovery, evident in renewed inflows into the SPDR Gold Trust, the world’s leading gold-backed exchange-traded fund.

The impending G20 summit is another focal point, with officials from various countries expressing concern that U.S. monetary policies could devalue the dollar and increase commodity prices. If the G20 fails to ease global tensions, it might raise investor apprehensions about a growing divide among policymakers, leaving the world economy susceptible.

"There is significant uncertainty in the lead-up to the G20 meeting. A lack of surprises could trigger a market correction afterwards," suggested David Wilson, an analyst at Societe Generale. He also remarked that "gold is finding every possible reason to climb higher."

Traders anticipate a target price of $1,475 for the gold rally, with some suggesting that surpassing $1,500 is only a short distance away, driven partly by strong seasonal demand.

Palladium saw a nearly 3% increase, reaching $726.22 per ounce, marking its fifth consecutive day of gains and positioning it for a ninth weekly increase. The price of palladium has advanced by around 80% this year, propelled by robust demand from investors eager to capitalize on its use in China’s growing gasoline-powered automotive sector.

Spot silver was quoted at $28.77 per ounce, up from $27.69 late in New York on Monday, while palladium surged to $725.50 from $705.22. Platinum traded at $1,789.00 per ounce compared to $1,771.50 late in New York on Monday.