Greece's Downgrade to Junk May Boost Gold
Source: Bloomberg, Nicholas Larkin (6/15/10)
"Bullion heads for 10th straight annual advance—longest run of gains since 1920."
German investor confidence plunged the most since October 2008 on concern that the sovereign debt crisis will undermine export prospects and crimp growth in Europe's largest economy. Moody's Investors Service yesterday cut Greece's credit rating. Bullion is trading within 2.3 percent of a record set last week.
Gold is trading “with greater consideration of its safe- haven status,” Barclays Capital analyst Xin Yi Chen said today in a report. The metal is “on one hand supported by lingering worries over sovereign debt issues and on the other lacking fresh momentum to break significantly on the upside.”
Bullion has jumped 12% this year, climbing to a record $1,254.50 an ounce on June 8, and is headed for a 10th straight annual advance, the longest run of gains since at least 1920. The metal has climbed amid speculation that debt-cutting measures by European nations will slow growth.
Moody's yesterday cut Greece's credit rating to junk, citing “substantial” risks to the nation's economic growth from the austerity measures tied to a 110 billion-euro ($134 billion) aid package from the European Union and the International Monetary Fund.
“Gold is viewed more as a universal currency with its safe-haven, last-resort properties,” said Bayram Dincer, a commodity analyst at LGT Capital Management in Pfaeffikon, Switzerland. Gold may be supported by the Greece downgrade, he said.