Gold Rises 16-Week High as Portugal Woes Spur Demand for Haven

Jul 10, 2014 2:55 pm ET

July 10 (Bloomberg) -- Gold futures climbed to a 16-week high as banking concerns in Portugal and a slump in equities boosted demand for the precious metal as a haven.

In Portugal, Banco Espirito Santo SA bonds plunged to records after a parent company delayed debt payments on short- term notes, fueling concern that the euro region remains vulnerable to financial shocks. The Standard & Poor’s 500 Index of U.S. shares fell as much as 1 percent.

Gold has climbed 11 percent this year, outpacing gains for indexes of commodities, equities and Treasuries. Investor holdings in exchange-traded products backed by the metal have rebounded this month as turmoil spread in the Middle East and Eastern Europe. Palladium, platinum and silver extended rallies.

“Equities are getting hammered, and we are seeing a flight to safety,” Frank Lesh, a trader at FuturePath Trading LLC in Chicago, said in a telephone interview. “Concerns about Europe are coming back to the forefront.”

Gold futures for August delivery rose 1.1 percent to settle at $1,339.20 an ounce at 1:35 p.m. on the Comex in New York. Earlier, the price reached $1,346.80, the highest for a most- active contract since March 19. Trading was 48 percent higher than the 100-day average for this time, according to data compiled by Bloomberg.

Ukraine targeted separatists near Donetsk with air strikes, killing about 50 fighters, as the European Union prepared to expand sanctions in response to the pro-Russian violence that has rocked the country since March. Israel is mobilizing 20,000 soldiers for a possible ground invasion of the Gaza Strip to halt rocket bombardments.

Fed Stimulus

Last year, gold slumped 28 percent, the most since 1981, amid an equity rally to a record and speculation that the Federal Reserve would taper U.S. monetary stimulus. The metal climbed 70 percent from December 2008 to June 2011 as the Fed bought debt and cut borrowing costs to near zero percent.

Global holdings in gold ETPs have climbed to a two-month high, data compiled by Bloomberg show. Assets in products backed by platinum and palladium rose to records this month.

Palladium futures for September delivery advanced 0.1 percent to $873.60 an ounce on New York Mercantile Exchange. The price reached $877.75, extending a rally to the highest since February 2001. Russia is the world’s top source of the metal.

Supplies were disrupted because of a five-month mining strike that ended in late June in South Africa, the biggest producer of platinum and the second-largest for palladium.

Platinum futures for October delivery rose 0.7 percent to $1,517 an ounce on the Nymex. The price reached $1,523.80, the highest since Sept. 4.

Silver futures for September delivery climbed 2.1 percent to $21.508 an ounce on the Comex. The metal reached $21.63, the highest since March 17.

Today, silver and gold were the top gainers in the Bloomberg Commodity Spot Index of 22 prices in energy, metals and agriculture. The gauge fell to a 20-week low as grain and livestock futures dropped.

--With assistance from Kateryna Choursina in Kiev and Jonathan Ferziger in Tel Aviv.