Gold hits $1,778 in biggest 3-day rally since 2008

Tue Aug 9, 2011 2:09pm GMT
 

By Amanda Cooper

LONDON (Reuters) - Gold hit a record high on Tuesday in its biggest three-day rally since the depths of the financial crisis in 2008, as investor fears over the threat to the global economy from the European and U.S. debt crises hit assets seen as higher risk.

Though spot prices retreated from highs as stock markets opened higher in the United States, they remained up 1.4 percent on the day at $1,739.60 an ounce at 1342 GMT, having earlier peaked at $1,778.29.

"The short run uptrend is intact," said VTB Capital analyst Andrey Kryuchenkov. "Panic dominates for now and even though we have rebounded a bit on the broader market, people will still fear liquidating substantial gold longs."

Gold has risen by about 7 percent this month, driven by flows of cash out of equities, bonds and currencies, after the United States lost its top-notch credit rating.

Investors have lost confidence in the ability of European leaders to stem the spread of the debt crisis that has now engulfed the euro zone's third- and fourth-largest economies, Italy and Spain.

European stocks lost over 5 percent in early trade, higher-yielding currencies slid, German government bonds and the Swiss franc rallied as investors ditched anything perceived to be risky.

"The market could come off from here, but it's headed in a northerly direction," said ANZ head of metal sales Peter Hillyard earlier. "From where we are now, you might think we could see some sort of pull-back. But I'm talking about a momentary thing, a pull-back like the loading of a gun, which then fires away."

Reflecting the rush into gold, holdings of metal in exchange-traded funds rose for a twelfth day to an all-time high near 70 million ounces, equivalent about half of total supply in 2010, based on World Gold Council data.   Continued...

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