Gold Surges to Record After U.S. Debt Limit Discussions Stall

Gold Surges to Record After U.S. Debt Limit Discussions Stall
July 25 (Bloomberg) --
Gold climbed to a record on demand for an investment haven as failure to raise the federal debt limit intensified concern of a default in the U.S.
Gold for August delivery climbed as much as 1.4 percent to $1,624.30 an ounce in New York. The metal traded at $1,617.20 an ounce at 7:41 a.m. in Singapore. Immediate-delivery gold also gained as much as 1.4 percent to $1,624.07 an ounce.
“There was more of an investor response to debt fears in both Europe and the U.S. which took hold and drove interest in gold,” Gavin Wendt, director at Sydney-based Mine Life Pty Ltd., said by telephone. “We saw a situation where investors were shying away from the U.S. dollar and showing a preference for a safe haven.”
House Speaker John Boehner told Republicans that there’s no agreement on a plan for raising the ceiling before a default threatened for Aug. 2. The impasse has boosted the chance Standard & Poor’s will cut the U.S. credit rating from AAA within three months to 50 percent, the company said July 21.
“EU resolve on Greece shifts market focus to stalled U.S. debt-ceiling talks, which gold prices are likely to track,” James Steel, an analyst at HSBC Securities USA Inc., wrote in a note. “A sudden agreement on the debt ceiling is always possible, and we would expect gold to react quickly and negatively to any such news.”
A Republican congressional official said Boehner, speaking by telephone to lawmakers, is reporting that discussions are continuing on raising the $14.3 trillion debt ceiling. The Dollar Index, a six-currency gauge of the dollar’s value, declined as much as 0.3 percent today.
‘Uncertainty’
“The longer the uncertainty goes on, the greater the investor appetite for gold, that is without doubt,” Wendt said. “What we’re seeing is a reaction to that uncertainty.”
Republicans prepared to force action on a shorter-term extension of the limit than Obama has requested, defying a veto threat. The president would veto a measure that doesn’t extend the limit into 2013, White House Chief of Staff Bill Daley said in an interview on NBC’s “Meet the Press” on July 24.
Daley warned that “markets around the world” would react negatively to a short-term measure offering less than $2.4 trillion in borrowing authority.
Silver futures for September delivery jumped 1.1 percent to $40.56 an ounce on the Comex. The metal for immediate delivery climbed 1.2 percent to $40.5537 an ounce.
To contact the reporter on this story: Phoebe Sedgman in Melbourne at psedgman2@bloomberg.net
To contact the editor responsible for this story: Richard Dobson at rdobson4@bloomberg.net
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