Gold prices hit a record $1,580.70 an ounce on Wednesday as concerns over the eurozone debt crisis deepened, and after minutes to the Federal Reserve's June meeting suggested some members were pondering the need for additional monetary easing. Spot gold was up 0.8 percent at $1,578.10 an ounce at 1359 GMT.
It has risen 11 percent so far this year and has more than doubled in price in the last four years. Gold is set for an eighth consecutive day of gains, something it has not achieved since mid-October 2006, when it rose for nine days in a row. "Gold will keep rising for the next five years, even if it has some crests and troughs," said Michael Widmer, an analyst at Bank of America-Merrill Lynch. "Those holding gold should hold onto it, while others should probably get their hands on it as it is going to be on an upward trend.
"The sovereign debt crisis is helping the gold prices rise but even if it is addressed in the short-term, the developed countries are in so much debt that it will continue to drive gold up for the next 10 years." European Union leaders are expected to hold an emergency meeting on Friday after finance ministers acknowledged for the first time that some form of Greek default may be needed to cut Athens' debts and stop contagion spreading to Italy and Spain. On the other side of the Atlantic, minutes of the Fed's last meeting showed some Federal Reserve officials believe further monetary policy easing could be needed if the recovery remains too sluggish to cut the stubbornly high US jobless rate and if inflation eases as expected.
"The debt crisis is if anything escalating, with ratings agencies now downgrading Ireland into junk territory. You have had rethinking on what should happen," said Credit Agricole analyst Robin Bhar. Fed chairman Ben Bernanke is due to testify on the US economy and monetary policy before the House Financial Services Committee at 1400 GMT. Gold rallied to record highs in sterling, euros and South African rand as well as dollars on Wednesday.
Reflecting the heightened investor demand for metal, global holdings of gold in exchange-traded products witnessed their largest daily inflow since early April, driven by a hefty rise in holdings of metal in the SPDR Gold Trust, the world's largest gold-backed ETF.
Adding to worries about the eurozone debt crisis, Moody's cut Ireland's sovereign rating to junk status and warned of the likelihood of Dublin needing a second bailout, a week after it cut Portugal to junk. "With European sovereign debt fears intensifying again, little clarity on what eurozone officials intend to do next and cross-asset market confidence taking a bashing, gold has been a beneficiary, much like the Swiss franc. And in this nervous environment, we prefer assets that have limited downside exposure - ie gold over other precious metals and commodities," said UBS strategist Edel Tully.
US gold futures for August delivery were up $17.30 an ounce at $1,579.60, also off a record $1,582. Spot silver was last up 3.6 percent on the day at $37.36 an ounce, bringing the gold/silver ratio - the number of ounces of silver needed to buy one ounce of gold - to 43.06 from 43.46 on Tuesday. Palladium, which depends largely on the Chinese car market as a source of demand for the metal in gasoline-powered vehicles, rose 2.4 percent to $780.22 an ounce. Platinum echoed the strength in other industrial precious metals and rose 1.4 percent to $1,752.49.
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