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Gold hits four-month high after Bernanke's comments fuel buying
Gold hit a four-month high on Tuesday after comments from Federal Reserve Chairman Ben Bernanke weighed on the dollar and triggered a drop in US equity markets, fuelling safe-haven buying of the metal.
- Reuters
- Published: 23:39 July 15, 2008
London: Gold hit a four-month high on Tuesday after comments from Federal Reserve Chairman Ben Bernanke weighed on the dollar and triggered a drop in US equity markets, fuelling safe-haven buying of the metal.
US stocks slid as much as two per cent and the dollar wilted after Bernanke said high oil prices, a weaker housing market and tighter credit conditions threaten the economy.
Spot gold hit $987.75 an ounce, the highest since March 19, before easing to $985.20/986.20 an ounce at 1438 GMT, against $971.20/972.20 late in New York on Monday.
"The problems on the equity markets, uncertainty, and general risk aversion are all bullish for gold at the moment," said Lehman Brothers analyst Michael Widmer.
Under stress
Bernanke said US financial markets and institutions remain under "considerable stress", and added that restoring financial market stability is a top priority for the Fed.
Turmoil in the markets has benefitted gold, which is often seen as a safe haven from risk that can be bought as an alternative investment to more volatile assets such as stocks.
Weakness in the dollar, which struck a record low against the euro yesterday, is also buoying the precious metal. Gold typically moves in the opposite direction to the dollar, as it is bought as a currency hedge.
Gold has risen sharply in other currencies as well as the US dollar, reinforcing gold's appeal as a safe haven.
In euro terms it hit a high of 617.92 euros an ounce after Bernanke's comments, its highest since March 18.
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