Gold climbs as eurozone debt crisis intensifies

08:25, April 29, 2010      

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Gold futures on the COMEX Division of the New York Mercantile Exchange extended gains on Wednesday, as euro sank to one-year lows against U.S. dollar amid intensified sovereignty debt crisis in Europe. Silver and platinum both dropped.

The most active gold contract for June delivery rose 9.60 U.S. dollars, or 0.8 percent, to finish at 1,171.80 dollars.

Rating agency Standard & Poor's announced on Wednesday to downgrade the debt rating of Spain by one notch to AA, indicating a negative outlook and possible further downgrade.

Standard & Poor's' move on Spain after it cut Greece and Portugal's debt ratings Tuesday has underpinned investors' worries that the contagion from Greek debt crisis is spreading through the eurozone. Fears of prospective debt defaults drove investors to flock to hard assets like gold as a flight to safety in times of crisis.

Meanwhile, Federal Reserve's decision to keep interest rates near zero for an "extended period", despite a brighter U.S. economic outlook has also added upward pressure to gold price, since lower interest reduced the opportunity cost of holding gold.

Fed's decision to keep its ultra-loose monetary policy stance also boosted oil price to bounce on Wednesday, and further lifted gold, as investors usually purchase gold as a hedge against oil- led inflation.

May silver was down 1.2 cents to 18.107 dollars per ounce. July platinum dropped 7.3 dollars to 1,713.6 dollars an ounce.

Source: Xinhua


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