Gold inches up as global economic fear grows

08:28, May 26, 2010      

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Gold futures on the COMEX Division of the New York Mercantile Exchange continued to rally on Tuesday, driven by investors' increasing pessimism about future global economic growth. Silver and platinum both retreated.

The most active gold contract for June delivery rose 4.0 U.S. dollars, or 0.3 percent, to finish at 1,198.0 dollars an ounce.

The euro extended losses against the U.S. dollar on Tuesday as the fact that the debt crisis has spilled into Spain, a much larger European economy, worsened investors' concern that the harsh austerity measures which eurozone nations are forced to take would let European economy lag behind for an extended period of time and raise the risk of a double-dip recession of global economy.

A disappointing report on U.S. home prices also accounted for the weak tone. The Standard & Poor's/Case-Shiller 20-city home price index in March dropped 0.5 percent from February, suggested that the U.S. housing market still lacks vigor, given the near historically low mortgage rates.

Gold surged to break 1,200 dollars per ounce earlier in the session, as the uncertainty about the spillover effect of the European sovereignty debt crisis on U.S. and world economy as well as the escalating tensions on the Korean Peninsula fueled investor risk aversion and spurred fresh demand of gold. But the surge in dollar and the sharp break in stock market forced gold to pare some of its earlier gains prior to the close and end moderately higher.

July silver was down 21.9 cents, or 1.2 percent, to settle at 17.781 dollars per ounce. July platinum trounced 42.6 dollars, or 2.8 percent, to close at 1,491.9 dollars an ounce.



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