Gold surged on flight to safety

08:20, May 27, 2010      

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Gold futures on the COMEX Division of the New York Mercantile Exchange advanced for a third day on Wednesday, as slumping euro spurred fresh demand of gold as safe- haven. Silver and platinum both rallied.

The most active gold contract for June delivery rose 15.4 U.S. dollars, or 1.3 percent, to finish at 1,213.4 dollars.

The U.S. dollar continued to rally against euro on Wednesday, benefited by more signs of increasingly strong U.S. economic recovery. The U.S. Commerce Department said in a report on Wednesday that demand for durable goods increased 2.9 percent in April, the largest gains in three months. Another report from Commerce Department showed that sales of new single-family homes soared 14.8 percent last month, as homebuyers rushed to sign contracts before a federal tax credit expired at the end of April.

Although the nagging concerns that eurozone debt crisis may spill into other parts of the world and lead to a complete derailment of the nascent global economic recovery still persists, the reports bolstered investors confidence that U.S. manufacturing and housing industries might be strong enough to weather the spreading of European debt crisis.

Meanwhile, a leading German consumer confidence index for June dropped unexpectedly, suggested the ongoing fears about the weak currency and the austerity measures has heavily weighed on the consumer confidence in the largest European economy.

The strong U.S. economic data helped speed the decline of euro against U.S. dollar. Investors flocked to gold as euro, the perceived safe harbors over currencies has been considered riskier.

World Gold Council forecasted in a report on Wednesday that the demand for the bullion on the sovereign risk concerns as well as physical demand from China, India and other Asian countries would increase, which also added upward pressure on gold.

July silver added up 52.5 cents, or 3.0 percent, to settle at 18.306 dollars per ounce. July platinum rebounded 38.4 dollars, or 2.6 percent, to close at 1,530.3 dollars an ounce.



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