New Delhi: Gold rose towards its record high on Thursday, supported by worries about the widening euro zone debt crisis and slowing global growth and shrugging off strength in the dollar after Japan’s intervention in the currency market.
“Gold seems to have wings at the moment as there are lots of macro and sovereign debt uncertainties,” said David Thurtell, an analyst at Citigroup.
“The price of $1,700 seems easy in the current climate, and the market is probably targeting $2,000 now.”
Spot gold gained 0.4% to $1,666.49 an ounce by 9:11am, off a record of $1,672.65 set in the previous session.
US gold edged up 0.2% to $1,669.6 an ounce. It reached an all-time high of $1,675.9 on Wednesday.
Gold has hit record highs in the past two consecutive sessions, even after the United States averted a debt default, as investors focused on the gloomy outlook for global growth, while the sovereign debt crisis in the euro zone threatened to engulf Italy.
The European Central Bank is expected to halt its rate hike cycle and probably signal a readiness to buy bonds again, when policymakers meet later in the day.
Investors are also eyeing the key US payrolls data for July due on Friday, after a recent spate of disappointing data including slowing manufacturing sector growth and faltering consumer spending fuelled fears of deteriorating economic conditions.
The dollar rose nearly half a percent against a basket of currencies, as it climbed above ¥79 for the first time in two weeks after the Bank of Japan intervened in the market intermittently to stem the yen’s strength.
A stronger dollar usually discourages buying by holders of other currencies, but worries about contagion from the debt crisis in Europe and sluggish US growth outweighed the action by Japan’s central bank.
Technical analysis suggested that gold could rise to $1,679 an ounce, said Reuters market analyst Wang Tao.
The Relative Strength Index, or RSI, for gold climbed above 75, its highest since the end of April during bullion’s previous record-setting rally. An RSI reading above 70 indicates the market is overbought.
Holdings in the SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, rose for a second day straight to 1,286.30 tonnes on Wednesday, highest since late December.
The amount of gold held by the fund grew nearly 7% since the beginning of July, compared to a 6-percent, or 72-tonne, outflow in the first half of the year.
Recent reports of central banks’ gold purchases reassured investors that gold’s bull run may have a long way to go.
“Gold is not a punters’ market, as there’s real demand but not just hot money that drives prices higher,” said a Singapore-based trader.
“Every dip has found pretty secure demand, and I don’t know if we are going to see the long-awaited brutal sell-down people seem to have been anticipating.”
Spot silver rose to as high as $42, matching a three month high set on Wednesday. Silver is far from breaking its record of $49.51 set at the end of April, but leads the precious metals complex with a gain of 36 percent so far this year.
Spot gold has risen about 17% so far this year.