Gold rose on Wednesday as investors bought the precious metal on fears that a key vote in Portugal could topple the country's government and on soaring tensions in the Middle East.
|||Gold rose on Wednesday as investors bought the precious metal on fears that a key vote in Portugal could topple the country's government and on soaring tensions in the Middle East.
Spot gold was bid at $1,433.35 a troy ounce at 13:45 SA time from $1,429.50 late in New York on Tuesday. The precious metal hit a record high of $1,444.40 an ounce on March 7.
The trigger for the latest flurry of gold purchases was the expectation that Portugal's parliament would reject the government's latest austerity measures, setting the stage for the possible collapse of the minority Socialist administration a day before a European summit.
“Today there is focus on Portugal. There are debt problems more generally in the western world and of course we should not forget the Middle East, which also leads to safe-haven flows,” said Christin Tuxen, analyst at Danske Bank.
“Longer term, the fact that interest rates are on the rise generally will make the opportunity cost of investing in gold higher, making it less attractive.”
Conflict in the Middle East has helped gold market sentiment and boosted oil prices because of worries about supply disruptions in the region.
Gold is used as a hedge against inflationary pressures, often triggered by rising oil prices.
INTEREST-BEARING ASSETS
European Central Bank members have signalled they intend to raise euro zone interest rates in April.
Expectations of higher interest rates in the euro zone are one reason why the euro earlier this week rose to a four-and-a-half month against the dollar.
A weaker dollar makes commodities priced in the U.S. cheaper for holders of other currencies.
“Although the weaker dollar benefits gold, higher interest rates could weigh on the precious metal as it will have to compete against interest-bearing assets,” ANZ said in a note.
Healthier growth prospects for developed countries such as the United States, the world's largest economy, has persauded some investors to move into equities at the expense of gold.
However, forecasts of stronger industrial demand have helped silver prices climb. Spot silver was bid at $36.59 an ounce from $36.34 late on Tuesday.
“While many market participants are impressed by silver's industrial and retail demand, and are concerned about physical shortages, another portion believe there is too much speculative noise in the market right now,” UBS said in a note.
Platinum was bid at $1,741.75 an ounce from $1,732.00 and palladium at $738.83 from $733.00.
“Some people think the sell-off after the quake was overdone, they are buying again,” a trader said.
Both platinum and palladium are used in autocatalysts and have come under pressure since Japan's earthquake shut car factories in Japan.
Toyota Motor Co has halted operations at its 12 main assembly plants in Japan until at least Saturday, which will result in lost production of 140,000 vehicles.
“Japan accounted for 15 percent of global platinum consumption last year, and demand in the short term will be weaker following the closure of industry after the earthquake/tsunami,” Credit Agricole said in a note.
“Any disruptions to the supply of key components imported from Japan would also affect industrial production/manufacturing activity in other parts of the world.” - Reuters
Source: http://www.iol.co.za/gold-s-appeal-boosted-by-portugal-vote-1.1046064
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