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NEW YORK (AP) — Gold prices pushed to new heights Tuesday as
investors digested the possible consequences of the lowered U.S.
credit rating and Europe’s debt crisis.
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Some investors view gold as a safer bet amid rising worries about
debt levels of the major economies and tumbling stock markets. Its
value, unlike that of a currency, doesn’t hinge on whether
countries can make their bond payments, or on the vigor of their
economies.
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In midday trading, gold futures rose $19.50, or about 1 percent, to
$1,732.70 per ounce after setting a record of $1,782.50 earlier in
the day.
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The declining appeal of the U.S. dollar as a safe haven and
nervousness about flagging global growth have helped propel
gold.
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The metal’s price has more than doubled since the recession began
in late 2007. Its climb accelerated this summer as U.S. lawmakers
took a fight about raising the country’s ability to borrow money
needed to pay debts to the last minute, and Europe’s debt crisis
threatened to spread to two of its biggest economies, Spain and
Italy.
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Standard & Poor’s last week cut the U.S. credit rating to AA+
from the top-notch AAA because of worries that politicians are too
sharply divided to enact significant spending cuts.
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The Federal Reserve’s policymakers are meeting Tuesday. Investors,
fearing the increasing likelihood of a recession, are expecting the
Fed may announce new efforts to support the economy. Central bank
efforts to boost the economy by pushing down interest rates are
already reflected in gold’s price, said HSBC commodities analyst
James Steel.
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The central bank’s extraordinary efforts to drive interest rates
lower in order to support lending tempered the dollar’s appeal as a
safe haven. That’s helped make gold more attractive to
investors.
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While gold on Monday topped $1,700 an ounce for the first time, it
remains below a 1980 peak when adjusted for inflation. In 1980, an
ounce of gold sold for $850, or about $2,400 in today’s
dollar.
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