Published: Monday, 8 Aug 2011 | 10:19 AM ET
By: Reuters
Gold vaulted above $1,700 an ounce for the first time on Monday, after the respective pledges by the Group of Seven Nations (G7) and the European Central Bank (ECB) to quell the turbulence in the financial markets did nothing to put investors at ease.
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Standard & Poor's downgrade Friday of U.S. sovereign debt ![[cnbc explains]](http://media.cnbc.com/i/CNBC/Sections/News_And_Analysis/_News/_CNBC_EXPLAINS/_IMAGES/CNBC_explains_icon1.gif)
was widely anticipated, but its longer-term impact on anything from mortgage rates to the economy is unclear.
was widely anticipated, but its longer-term impact on anything from mortgage rates to the economy is unclear.Spot gold [XAU= 1706.39 
44.14 (+2.66%) 
] was set for a second consecutive trading rally, up 2 percent from Friday at $1,696.56 an ounce, having hit a record $1,715.01 earlier and having traded at all-time highs in sterling and euros.
44.14 (+2.66%) ] was set for a second consecutive trading rally, up 2 percent from Friday at $1,696.56 an ounce, having hit a record $1,715.01 earlier and having traded at all-time highs in sterling and euros."We are so much more reliant now on what our macroeconomists are telling us. They had a view that we wouldn't be moving back into recession and that growth would accelerate into next year, but events are changing quite quickly," said Deutsche Bank analyst Michael Lewis. "The main beneficiary will continue to be gold."
Investors have bought more gold in the last month than in the prior six months, looking at the increase in open interest on COMEX for speculators and money managers, as well as inflows into exchange-traded products.
According to data from the Commodity Futures Trading Commission, which collects information on holdings of futures and options, and to exchange traded fund data collected by Reuters, investors bought more than 18 million ounces of gold, or 30 percent of total identifiable investment demand in 2010, in the last month alone, compared with about 8.4 million in the year to early July.
data collected by Reuters, investors bought more than 18 million ounces of gold, or 30 percent of total identifiable investment demand in 2010, in the last month alone, compared with about 8.4 million in the year to early July.Finance chiefs from the world's industrial powers pledged on Sunday to take whatever actions were needed to steady financial markets, spooked by the political wrangling in Europe and the U.S. over slashing their huge budget deficits.
Fewer 'Safe Havens'?
Treasury Secretary Timothy Geithner called the S&P downgrade "a really terrible" move, and said U.S. Treasury debt is as safe as it was before the downgrade, urging European leaders to ensure there is an "unequivocal financial backstop" for euro zone governments facing fiscal and debt problems.
"The uncertainty in the financial markets is keeping gold prices underpinned. It's essentially safe-haven buying," said Ong Yi Ling, investment analyst at Phillip Futures. "One of the events that investors will watch is of course the (Federal Open Market Committee) meeting that is scheduled Tuesday ... investors will scrutinize the statement on the assessment of the economy and outlook for monetary policy."
Investors are watching for any statement on whether the Federal Reserve will ease monetary policy further. The Fed's $600 billion quantitative easing program, which ended in June this year, has been instrumental gold's rise, even if adjusted for inflation, the bullion price remains well below the all-time highs of more than $2,000 an ounce in the early 1980s.
will ease monetary policy further. The Fed's $600 billion quantitative easing program, which ended in June this year, has been instrumental gold's rise, even if adjusted for inflation, the bullion price remains well below the all-time highs of more than $2,000 an ounce in the early 1980s.The prospect of an even longer period of low U.S. interest rates prompted Goldman Sachs to raise its longer-term forecast for the gold price. Goldman said it had lifted its forecasts to $1,645, $1,730 and $1,860 on a three-month, six-month and 12-month horizon, respectively.
Goldman had previously forecast the gold price peaking at $1,600 an ounce in mid-2012.
Meanwhile, gold in euros hit a record 1,195.66 euros an ounce, bringing gains in the last month alone to over 12 percent, while gold in sterling hit a peak of 1,043.76 pounds, for a gain of 9.3 percent in the same period.
In other precious metals, silver got a lift from the strength in gold as it can sometimes act as a cheaper safe-haven proxy for investors.
Spot silver [XAG= 39.34 1.05 (+2.74%) ] was last up 3.7 percent on the day at $39.72 an ounce, while platinum [XPT= 1715.50 3.15 (+0.18%) ] rose 0.8 percent to $1,725.74 an ounce. The ratio of gold to platinum earlier fell to around parity for the first time since late 2008.
1.05 (+2.74%) ] was last up 3.7 percent on the day at $39.72 an ounce, while platinum [XPT= 1715.50 3.15 (+0.18%) ] rose 0.8 percent to $1,725.74 an ounce. The ratio of gold to platinum earlier fell to around parity for the first time since late 2008.Palladium [XPD= 725.47 
-14.28 (-1.93%) ] was last down nearly 1 percent at $734.45. The palladium price has fallen by more than 14 percent in the last six trading days, since hitting a five-month high.
Copyright 2011 Thomson Reuters. -14.28 (-1.93%) ] was last down nearly 1 percent at $734.45. The palladium price has fallen by more than 14 percent in the last six trading days, since hitting a five-month high.http://www.cnbc.com/id/44053673
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