Business | Markets

Investors rush for cover over Europe worries

Gold's safe haven status sends it to third high within a week

  • Agencies
  • Published: 00:00 May 15, 2010
  • Gulf News

  • Image Credit: AFP
  • Gold hit an all-time high in Mumbai, trading at Rs18,225 per 10 grams, while the cost of gold in the UAE yesterday was Dh1,502 for the same amount. Gold has gained on the back of increased retail demand driven by festival buying in India.

Dubai: Investors spooked by bearish outlooks on the indebted European economies rushed for cover yesterday, pulling cash out of stocks and rolling it into safe-haven instruments like gold and money market funds.

The price of gold hit another historic high at $1,248.95 in trading yesterday before heading slightly lower. Apart from its safe-haven appeal, gold has gained on the back of increased retail demand driven by festival buying in India.

"The fresh move in the yellow metal was also supported by heavy demand from retailers and jewellers in view of the ongoing marriage season and the upcoming auspicious occasion of Akshiya Tritiya on May 16," a Dubai-based trader said.

The metal hit an all-time high in Mumbai, trading at Rs18,225 per 10 grams, while the cost of gold in the UAE yesterday was Dh1,502 for the same amount of the metal.

Gold futures reached $1,249.70 in New York, while bullion advanced to all-time highs in euros, Swiss francs and British pounds. The euro fell to its weakest level in 14 months against the dollar amid speculation that debt-cutting measures by European nations will undermine economic growth.

Money market funds globally attracted a year-to-date high of $23.5 billion during the week, according to data collated by EPFR Global. It was the first weekly inflow into these ultra-safe funds since the first week of 2010. Bond funds too took in fresh money and their inflow streak now stands at 61 consecutive weeks.

Equity funds took a beating during the week, as did stock markets yesterday. Fears that Greece's fiscal problem could raise borrowing costs around the world and plunge Europe back into recession prompted a crash re-rating of the outlook for emerging markets in early May. Emerging market equity funds combined sustained outflows of $2.1 billion during the week.

The aversion to risk increased as global stock indices plummeted yesterday for a second weekend in a row.

US crude sheds over $1 on selling pressure

Oil prices tumbled further yesterday at the end of a traumatic week during which the market was hit by high US crude stockpiles, stubborn euro zone economic concerns and a strong dollar, traders said.

New York's main contract, light sweet crude for June delivery, shed $1.66 to $72.74 a barrel. Brent North Sea crude for June shed 2.26 cents to $77.85 a barrel in London afternoon deals.

"Crude oil prices came under selling pressure this week, following record oil inventories at Cushing and amid general uncertain and fragile economic conditions in the euro zone," said Sucden analyst Myrto Sokou.

"It seems that global crude oil demand has not rebounded yet to the extent that global oil supply has, and this is possibly going to weigh on crude oil prices in the near term."

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