Gold rises to new record as investors flock to safety

Gold rises to new record as investors flock to safety
May 12, 2010 - 6:55AM

Gold futures rose to a record in New York as government debt in Europe spurred demand for the precious metal as an alternative to currencies.

Gold futures reached $US1232.50 an ounce amid concern that Europe's most-indebted nations will struggle to contain deficits after policy makers provided almost $US1 trillion in a rescue package. The metal priced in euros also reached an all-time high today, and bullion in UK pounds and Swiss francs has surged.

"This is the beginning of the unraveling of fiat currencies," said Michael Pento, the chief economist at Delta Global Advisors Inc. in Huntington Beach, California. "Money has to be backed by something. People are beginning to realize that gold is the world's reserve currency."

Gold futures for June delivery rose $US30.90, or 2.6 per cent, to $US1231.70 on the Comex in New York, compared with yesterday's settlement. The previous record was $US1227.50 on December 3.

Gold for immediate delivery reached an all-time high of $US1231.70, exceeding the previous record of $US1226.56 set on December 3.

Gold has climbed 11 per cent in 2010, following nine straight annual gains. This year, the euro has dropped more than 11 per cent against the US dollar, an index of equities in major markets is down and returns on the benchmark 10-year US were up 3.8 per cent.

"People are in panic mode," said Matt Zeman, a metals trader at LaSalle Futures Group in Chicago. "There is absolute panic over the risk of contagion spreading to other countries in Europe. Yields on Treasuries are so low, people are starting to look to gold as an alternative."

Bloomberg