Investors ditched the euro and turned to gold after Fitch cut Greece's debt ratings by three notches, pushing the country deeper into junk, while silver struggled to catch up with gains in bullion. In another sign that the continent's debt problems are escalating, Standard & Poor's cut its outlook for Italy to "negative" from "stable", helping bullion hit its highest in nearly two weeks.
Spot gold added $1.50 an ounce to $1,508.89 by 0606 GMT, having hit an intraday high around $1,518 an ounce. This was its strongest since May 11, but still well below a lifetime high around $1,575 struck in early May. "I would expect gold to be supported above the $1,500 level. If the crisis starts to involve other nations beyond Greece, then we could see gold heading to a new record high," said Ong Yi Ling, investment analyst at Phillip Futures in Singapore. "Silver is still trying to gain ground after the huge fall earlier. If we do see a new record for gold, then I think silver will move higher."
Silver was hardly changed at $34.76 an ounce, having hit an intraday high above $35 in volatile trade. Silver hit a record at $49.51 in late April before falling sharply on a broad sell-off in commodities and after exchange operators in Shanghai and New York raised the amount of money required to trade silver futures. Renewed worries in the euro-one over the weekend pulled the euro down to a record low against the Swiss franc, weakened risky assets such as Asian stocks and boosted safe haven investments. The physical sector saw bargain hunting from jewellers, but the overall market was subdued following a rise in bullion prices. Premiums for gold bars were steady at 80 cents to $1 to spot London prices in Singapore.
India is the midst of the wedding season, when parents give gold jewellery to their daughters as part of their dowry. Gold jewellery demand in India will likely remain strong in 2011 despite surging prices, the head of Gitanjali Gems, the country's biggest jewellery retailer, said.
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