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Gold gains as investors seek haven

 GOLD rose as weaker-than-expected economic data and continued worries on Greek debt sent participants into the metal as a safe haven, a departure from recent trading as a risk asset.

April gold rose $US11.30, or 1 per cent, to settle at $US1108.50 an ounce on the Comex division of the New York Mercantile Exchange.

The metal has been trading as a risk play in recent months, meaning it tends to fall when investors get squeamish about perceived riskier holdings, like those in commodities, high-yielding currencies and equities.

This shift from the historical norm of gold being seen as a safe-haven asset has come about in part because ultra-low interest rates have helped spark investor buying in the metal.

But gold returned to trade as a safety play in the latest session as increasingly bleak economic data are making market participants nervous about the economic recovery, said MF Global analyst Tom Pawlicki.

KEY COMMODITY PRICES: oil, gold, base metals, livestock and wheat

The US Labour Department reported today an increase of 22,000 in initial jobless claims to 496,000 in the week ended February 20, versus a forecast from economists for a decline of 13,000.

A Bank of England official said economic slack would keep dragging down inflation.

US Federal Reserve chairman Ben Bernanke said yesterday the US recovery from its deep recession was expected to be slow. Also yesterday, data showed that January new-home sales unexpectedly fell, and the Conference Board said its index of US consumer confidence plunged.

The safety allure of gold is particularly strong for European buyers worried about fiscal stress in Greece and other parts of the eurozone. The metal has recently hit a record high in euros.

“We’ve got a flight to quality into gold in Europe,” said Frank Lesh, broker and futures analyst with FuturePath Trading.

Moody’s Investors Service said that Greece’s debt rating may be cut if the government doesn’t move forcefully to reduce its burgeoning deficit. That comes on the heels of a Standard & Poor’s warning that the country’s credit quality may be lowered to junk status.

“There are genuine concerns about the EU,” said Stephen Platt, analyst with Archer Financial Services. “Will the European problems drag down the rest of the world’s economy?”

The fresh Greek concerns and jobless data initially pressured gold by sapping investor risk tolerance,” said Country Hedging analyst Sterling Smith.
“But participants began to repurchase gold positions around the lows of the day — $US1088.50 for April gold.

“We are finding some technical buying.”
Silver futures gained along with gold prices, Mr Pawlicki said. Comex May silver rose US16.9 cents, or 1 per cent, to settle at $US16.132 an ounce.

Platinum and palladium futures rose on support from higher gold prices, a trader said.

A weakening of the US dollar and some bargain hunting also boosted the white metals, the trader says.

Nymex April platinum rose $US23.90, or 1.6 per cent, to settle at $US1531.20 an ounce while June palladium on the exchange added $US1.05, or 0.2 per cent, to settle at $US425.50 an ounce…read more at The Australian