Gold Tops $1,700 for First Time as U.S. Rating Cut Spurs Demand

Gold climbed above $1,710 an ounce for the first time after Standard & Poor’s cut the top U.S. credit rating, fueling a slump in equities and the dollar amid concern that the global economy is slowing. Gold futures for December delivery jumped 3.1 percent to a record $1,702.70 an ounce on the Comex in New York and traded at $1,701.90 at 2:07 p.m. in Melbourne. Silver futures climbed as much as 5.7 percent. Spot gold soared 2.2 percent to $1,700.22 an ounce, also a record. “There’s just a pessimism or nervousness that’s associated with economies and currencies of these major nations,” Gavin Wendt, director at Sydney-based Mine Life Pty Ltd., said by phone. “At a time when investors are nervous of currencies, they’re nervous of equities, they’re nervous of everything, the only place for them to park their money is gold.”

About $5.4 trillion in global equity value has been erased since July 26, according to Bloomberg data, after Europe’s debt crisis worsened, reports on U.S. manufacturing and consumer spending showed the world’s largest economy was slowing and a political impasse over the budget deficit brought the American government to the brink of default. “It’s not just one of the safe havens, it’s the safe haven,” Wendt said, referring to gold. “Typically, in times of stress it would be the U.S. dollar and probably gold but with these circumstances, it’s really putting a line through the U.S. dollar.” Goldman Sachs Group Inc. raised its futures forecasts to $1,645 an ounce, $1,730 an ounce and $1,860 an ounce on a three- month, six-month and 12-month horizon as it expects real U.S. interest rates to stay lower for longer. The previous estimates were $1,565, $1,635 and $1,730 an ounce, it said in a report. “We continue to recommend long-trading positions in gold,” the bank said.

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