Gold extends gains as Europe debt concerns intensifies

11:04, July 07, 2011      

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Gold futures on the COMEX Division of the New York Mercantile Exchange continued to move up on Wednesday, buoyed by safe-harbor buying as Europe's debt problems reemerged as a major concern for investors. Silver rallied, but platinum dropped.

The most active gold contract for August delivery added 16.5 dollars, or 1.1 percent, to 1,529.2 dollars per ounce.

Moody's Investors Service downgraded Portugal's rating by four notches, placing the European nation's debt into junk status, as the ratings agency expressed concern about the growing risk of a second round of financing before it can return to the private market.

"The recent credit rating downgrade of Portugal has savvier investors concerned that the debt crisis in the euro region is spreading with analysts predicting that Ireland credit rating will also be downgraded to "junk status" sooner than later," said Mike Daly, a gold specialist with PFGbest here in Chicago.

China's central bank announced Wednesday its third interest rate increase this year, trying to curb its inflation. Some analysts believed that it helped take some of the wind out of gold' s sail.

"Normally when a central bank raises rates it would be 'bearish ' for the precious metals, however, these are not normal times and investors are more concerned about inflation than the tightening of money," Daly added.

Silver for September delivery jumped 50.6 cents, or 1.4 percent, to 35.916 dollars per ounce. Platinum for October delivery lost 8. 7 dollars, or 0.5 percent, to 1,733.4 dollars per ounce.

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