Gold hits new highs amid economic concerns

London: Gold and silver hit multi-month highs in Europe yesterday, with gold breaking above $1,250 (Dh4,590) an ounce for the first time since late June, as investors bought the metals amid concerns over the pace of US economic growth.

Spot gold hit a high of $1,251.45 an ounce and was at $1,250.55 an ounce at 9:20a.m. GMT, against $1,248.99 late in New York on Tuesday. Silver hit its highest since May 17 at $19.53 an ounce and was later at $19.42 an ounce against $19.34.

Support growth

Deutsche Bank analyst Daniel Brebner said concerns over economic activity in the United States were leading to "a growing acceptance that if conditions remain poor or deteriorate further, the Fed will move to support growth."

"There is an expectation that deflationary risk is being actively mitigated, and that the risk longer term is increasingly one of inflation," he said.

"That, and perhaps longer-term concerns over volatility in forex and interest rates, is sending some increased capital into the precious metals."

Concerns over the outlook for the US economy and a return of worries over Eurozone sovereign debt levels have led to volatility in equities and other assets seen as higher risk in the past month, boosting gold's appeal as a haven.

The precious metal hit session highs early yesterday as European shares turned briefly lower, having traded near its previous two-month highs earlier in the session.

Stock markets later recovered, tracking Asian shares, which benefited from a rebound in Chinese manufacturing.

The euro climbed 0.6 per cent against the dollar, while the Japanese yen steadied against the US currency after hefty gains.

Commodities largely firmed, with oil rising 0.8 per cent after the Chinese data, having fallen in the previous economic session, and base metals ticking higher.

On the investment side of the bullion market, holdings of the major gold and silver exchange-traded products, which issue securities backed by physical stocks of the precious metals, rose on Tuesday, suggesting healthy investor interest.

Gold exchange

The world's largest gold-backed exchange-traded fund, New York's SPDR Gold Trust, added another four tonnes of metal to its stocks, while the largest silver ETF, the iShares Silver Trust, increased its holdings by more than 30 tonnes.