Gold jumps to record on poor U.S. outlook, debt worry

NEW YORK/LONDON Tue Aug 2, 2011 10:12pm IST

Gold ingots of 1 kg and 500g are seen in this picture illustration taken in the treatment centre at the Banque Cantonale Vaudoise near Lausanne February 17, 2011.  REUTERS/Denis Balibouse/Files

Gold ingots of 1 kg and 500g are seen in this picture illustration taken in the treatment centre at the Banque Cantonale Vaudoise near Lausanne February 17, 2011.

Credit: Reuters/Denis Balibouse/Files

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NEW YORK/LONDON (Reuters) - Gold surged more than 1 percent to all-time highs on Tuesday, as more weak U.S. economic data fueled safe-haven buying on fears a slow economy may trigger more monetary stimulus by the Federal Reserve.

Bullion appeared headed for its biggest daily gain in three months as investors also worried that the European debt crisis might spread. Silver also jumped 2.5 percent as investors perceived a growing risk of a U.S. credit rating downgrade.

A bill to raise the $14.3 trillion U.S. debt ceiling and avert a default got enough votes to pass in the Senate and was scheduled to head to President Barack Obama, to be signed into law.

Bullion has rallied some 15 percent so far this year, and has gained more than 10 percent since the end of June when the Federal Reserve's $600 billion bond-buying program ended.

The U.S. Commerce Department reported that consumer spending slipped 0.2 percent in June for its first decline since September 2009. On Monday, another report showed factory acitvity cooled in June.

The weak U.S. data has fed fears of another recession in the world's largest economy, prompting investors to buy gold as a hedge against another round of money printing by global central banks, analysts said.

"With the worse-than-expected manufacturing index and personal spending data, gold is starting to factor in the need for further quantitative easing, further stimulus and more accommodative monetary policy, and that's why it's pushed into a record," said James Rife, an assistant portfolio manager at Haber Trilix Advisors, which manages $2 billion in assets.

Spot gold was up 1.4 percent at $1,640.80 an ounce by 11:52 a.m. EDT (1552 GMT), having touched its ninth record this year at $1,640.39.

U.S. gold futures for December delivery rose $21.80 to $1,643.50 an ounce.

Silver rose 2.5 percent to $40.27 an ounce.

Gold has hit record highs in dollars, euros, sterling, South African rand and Canadian dollars, indicating investors' distrust of volatile currencies. Central banks also remain buyers of bullion, with South Korea saying on Tuesday it bought 25 tonnes of gold between June and July to diversify its foreign reserves. It was its first purchase in more than a decade, boosting gold holdings to 39.4 tonnes.

"This news reiterates the fundamental view that most investors, asset managers, and even central banks hold true -- that gold remains the quintessential currency hedge, a stabilizing asset for portfolios, and a safe haven in uncertain economic times," said David Meger, director of metals trading at Vision Financial Markets, a futures broker based in Chicago.

Prices at 11:52 a.m. EDT (1552 GMT)

LAST NET PCT YTD

CHG CHG CHG

US gold 1643.50 21.80 1.3% 15.6%

US silver 40.320 1.011 2.6% 30.3%

US platinum 1794.50 -0.10 0.0% 0.9%

US palladium 829.00 -0.50 -0.1% 3.2%

Gold 1640.80 22.69 1.4% 15.6%

Silver 40.27 1.00 2.5% 30.4%

Platinum 1788.99 0.49 0.0% 1.2%

Palladium 825.47 0.22 0.0% 3.2%

Gold Fix 1637.75 13.75 0.8% 16.1%

Silver Fix 39.73 42.00 1.1% 29.7%

Platinum Fix 1793.00 3.00 0.2% 3.6%

Palladium Fix 824.00 7.00 0.8% 4.2%

(Reporting by Frank Tang; Editing by David Gregorio)

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