Gold Moves Higher on Spain's Debt Ratings Downgrade

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"Gold is riding the coattails of its role as the currency of fear"

Gold futures added to their gains in mid-day trading Wednesday as a debt ratings downgrade for Spain revved up fears of a spreading sovereign debt crisis in Europe.

Gold for June delivery gained $11.30, or 1%, to $1,173.50/oz on the Comex—the highest since December.

Prices had bounced between gains and losses in early Wednesday trade. They went moderately higher but got a decisive push upward as news that S&P had downgraded Spain's debt sent markets stumbling.

"Gold is riding the coattails of its role as the currency of fear," said Richard Ross, a technical analyst with Auerbach Grayson in New York.

The S&P action comes a day after downgrades for Portugal and Greece.

That it has risen in the past days despite a rising dollar "reinforces the notion that there are a lot more reasons to own gold" and bullion is the likely beneficiary of the latest financial storms, he added.

The June contract rose $8.20 to end at $1,162.20oz. Tuesday after the downgrade of credit ratings for Greece and Portugal hammered the U.S. equities market and some dollar-denominated commodities including crude oil.

The Dollar Index (DXY) strengthened to 82.69, up about 0.6% from late in the prior session.

Holdings on the SPDR Gold Trust (GLD) on Tuesday hit a fresh record high of 1,146.825 metric tons (1,264 short tons), according to the fund.

Other metals such as silver, platinum and platinum didn't benefit from the same safe-haven buying that lifted gold.

Silver for May delivery retreated 2 cents, or 0.1%, to $18.10/oz. Platinum for July delivery lost $10.60, or 0.6%, to $1,710.30/oz. Palladium for June delivery declined $11.90, or 2.2%, to $537/oz. Copper for July delivery was off 2 cents, or 0.6%, to $3.36/lb.

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