Gold Climbs to Six-Week High as Greek, Italian Risk Stokes Haven Demand

Gold Climbs to Six-Week High as Greek, Italian Risk Stokes Haven Demand

Gold advanced to the highest level in more than six weeks as concern Italian Prime Minister Silvio Berlusconi will fail to muster a majority for a key parliamentary vote tomorrow helped stoke demand for a haven.

Bullion for immediate-delivery climbed as much as 1 percent to $1,772.48 an ounce, the most expensive since Sept. 22, before trading at $1,770.18 by 5:18 p.m. in Melbourne. Gold for December delivery rose as much as 1 percent to $1,774 an ounce on the Comex in New York.

Berlusconi faces mounting pressure to step down as 10-year borrowing costs for the region’s third-biggest economy approach the 7 percent level that forced Greece, Ireland and Portugal to seek bailouts. Greek Prime Minister George Papandreou already agreed to step down. He met Antonis Samaras, leader of the main opposition party, and agreed to form a national unity government intended to lead Greece to elections and secure financing.

“We still haven’t seen any real concrete, brick-and-mortar action” that could alleviate the European debt crisis, said David Lennox, a resource analyst at Fat Prophets in Sydney. “The market’s still expecting there to be bad news coming out of Europe. It may not be Greece. They’re now looking at its neighbor in Italy and while that’s still there, the gold price will generally trade up.”

Greek Crisis
Papandreou’s resignation caps 10 days of turmoil that started with him securing a second bailout from the European Union, then roiling markets by unilaterally deciding to put the terms of that rescue to the Greek people in a vote, a plan he then dropped. He and Samaras will meet today to decide on the new premier, according to a statement.

Italy’s parliament will vote tomorrow on the 2010 budget report amid an unraveling of Berlusconi’s majority.

Bullion has climbed 25 percent this year, heading for an 11th consecutive annual advance. The metal reached a record $1,921.15 an ounce on Sept. 6.

Twenty-eight of 32 people surveyed by Bloomberg expect gold to climb on the Comex this week, the most since Oct. 14 and the second increase in a row. Bullion may rise to a record $1,950 by the end of the first quarter, according to the median estimate of eight of the 10 most accurate forecasters tracked by Bloomberg over the past two years.

Money managers increased their net-long positions in U.S. gold futures and options by 6.8 percent to the most in six weeks and in silver by 9.5 percent to a five-week high in the week ended Nov. 1. Holdings in exchange-traded products backed by gold advanced 0.1 percent to 2,284.6 metric tons on Nov. 4, data compiled by Bloomberg showed.

Cash silver gained 0.8 percent to $34.415 an ounce. Spot palladium rose 0.4 percent to $659 while platinum advanced 0.4 percent to $1,640 an ounce.

source: bloomberg.com