July 13, 2010, 7:05 AM EDT
July 13 (Bloomberg) -- Gold rebounded in London from the biggest decline in almost a week as a reduction of Portugal’s credit rating and prices below $1,200 an ounce boosted physical buying and investment demand.
Portugal’s credit rating was cut two levels to A1 at Moody’s Investors Service because of a rising debt burden and weak economic-growth prospects. The country is among European nations that are spending less in an effort to curb budget deficits after Greece’s fiscal crisis. Bullion yesterday slid 1.2 percent to close at $1,196.85 an ounce.
“The downgrade is a signal to the market that the situation is not over,” Bernard Sin, head of currency and metal trading at bullion refiner MKS Finance SA in Geneva, said by phone. “There is still long-term fear because of uncertainty. There is also very good physical demand from Asia” and some Middle East countries, he said.
Gold for immediate delivery added $9.90, or 0.8 percent, to $1,206.75 an ounce at 11:46 a.m. in London. The metal for August delivery was 0.7 percent higher at $1,206.80 on the Comex in New York.
Prices also gained as a report showed that German investor confidence fell more than analysts estimated in July, weakening for a third month.
Bullion rose to $1,206.50 an ounce in the morning “fixing” in London, used by some mining companies to sell output, from $1,205.50 at yesterday’s afternoon fixing.
Since 1920
Gold is up 10 percent this year and is set for a 10th straight annual increase, the longest run of gains since at least 1920. The metal reached a record $1,265.30 an ounce on June 21 as investors sought to protect their wealth against the crisis in Greece and other European nations struggling to repay debt, and on concern that the global recovery may slow.
“The Portuguese government’s financial strength will continue to weaken over the medium term,” Moody’s said in a statement, adding that the outlook is stable. Facing a surge in borrowing costs, the state has raised taxes and cut spending in an attempt to rein in the euro region’s fourth-largest budget deficit in an economy that has barely grown for a decade.
European Union finance ministers will gather in Brussels today to discuss the procedure of stress tests on banks and the disclosure of findings. Banks that fail the tests will “in the worst case” need government aid to strengthen their balance sheets, German Finance Minister Wolfgang Schaeuble said today.
15-Month Low
“Some investors see value in gold with prices dipping below $1,200,” said Park Hyun Seon, a Seoul-based trader at Eugene Investment & Futures Co. “Still, the market lacks momentum.”
Assets in the SPDR Gold Trust, the biggest exchange-traded fund backed by bullion, added 0.3 metric ton to 1,314.82 tons yesterday, according to the company’s website. Global ETF holdings rose 2.7 tons to a record 2,075.11 tons yesterday, according to Bloomberg data from 10 providers.
Silver for immediate delivery in London was 0.2 percent higher at $17.9875 an ounce. Platinum gained 0.9 percent to $1,527.50 an ounce, and palladium was up 1.4 percent at $460.45 an ounce.
--With assistance from Luzi Ann Javier in Singapore. Editors: John Deane, Dan Weeks.
To contact the reporters on this story: Kyoungwha Kim in Singapore at kkim19@bloomberg.net; Nicholas Larkin in London at nlarkin1@bloomberg.net.
To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net.
From Bloomberg Businessweek published on July 13, 2010, 7:05 AM EDT
