By Phoebe Sedgman and Madelene Pearson
Goldman Sachs Group Inc. raised its forecasts for gold futures yesterday to $1,730 in six months and $1,860 in a year based on expectations for real U.S. interest rates to stay lower for longer.
Photographer: Carla Gottgens/Bloomberg
Aug. 8 (Bloomberg) -- Manfred Huebner, managing director of Sentix Behavioral Indices, discusses investor sentiment and the outlook for gold prices. He speaks from Frankfurt with Bloomberg's Manus Cranny.
(Source: Bloomberg)
Aug. 8 (Bloomberg) -- Harry Skaliotis, head of client portfolio management at Man Group Plc's AHL Diversified Fund, talks about his investment strategy. He speaks with Maryam Nemazee on Bloomberg Television's "The Pulse." (Source: Bloomberg)
Aug. 8 (Bloomberg) -- Puru Saxena, chief executive officer of Puru Saxena Wealth Management, talks about the outlook for gold prices and the state of the global economy. Saxena speaks from Hong Kong with Mark Barton on Bloomberg Television's "Countdown."
(Source: Bloomberg)
A Chow Sang Sang Holdings International Ltd. employee arranges gold necklaces in a store in Hong Kong. Photographer: Jerome Favre/Bloomberg
Gold futures exceeded $1,770 an ounce for the first time as the global rout in equities and commodities deepened on concern the economic slowdown will worsen after Standard & Poor’s cut the U.S. credit rating.
Gold for December delivery in New York advanced as much as 3.6 percent to a record $1,774.80 an ounce and traded at $1,753.70 at 11:43 a.m. in Mumbai. Immediate-delivery gold rose as much as 3.1 percent to an all-time high of $1,772.38. Gold was costlier than platinum for the first time since 2008.
The precious metal has surged 23 percent this year, heading for an 11th year of gains, as the global sovereign-debt crisis and a faltering economy boost demand for wealth protection. Gold holdings had their biggest daily advance since May last year as of Aug. 8. John Paulson, who made $15 billion betting against subprime mortgages, is still the biggest investor in the largest exchange-traded fund backed by bullion.
“The market is now worried about another global recession,” Natalie Robertson, a commodity analyst at Australia & New Zealand Banking Group Ltd., said by phone from Melbourne. “The S&P downgrade of the U.S. credit rating has fueled a lot of those concerns and the market is also focusing on the European situation.”
Holdings in exchange-traded products backed by gold surged 1.4 percent to a record 2,216.8 tons on Aug. 8, data compiled by Bloomberg show, an 11th straight gain. Gold futures jumped $61.40, or 3.7 percent, yesterday to settle at $1,713.20 an ounce, the biggest gain since March 19, 2009.
Gold, Platinum
Gold advanced to a premium over platinum for the first time since December 2008 as demand for a haven outweighed the appeal of platinum used mostly in catalytic converters for the car industry, at risk from a slowing global economy.
Goldman Sachs Group Inc. (GS) raised its forecasts for gold futures to $1,730 in six months and $1,860 in a year based on expectations for real U.S. interest rates to stay lower for longer. The previous estimates were $1,635 and $1,730, the bank said in a report dated Aug. 7.
The S&P 500 lost 6.7 percent yesterday to 1,119.46 in New York as all 500 stocks fell for the first time since Bloomberg began tracking data in 1996. Yesterday’s rout wiped out about $2.5 trillion in global equity values, extending the total loss in market values since July 26 to $7.8 trillion, according to data compiled by Bloomberg.
Stocks, Oil
Asian stocks tumbled today, with the MSCI Asia Pacific index sinking 1.6 percent, paring losses of as much as 5.5 percent. Oil fell as much as 6.9 percent in New York, dropping below $80 a barrel, to the lowest in more than 10 months.
“The global financial crisis only happened a few years ago,” Robertson said. “I think everyone is very aware of that fact and there’re a lot of linkages with what’s happening now with what happened three years ago.”
S&P cut the long-term U.S. rating one level to AA+ from AAA on Aug. 5. The agency described the outlook as “negative” and criticized the nation’s political system for failing to adequately address deficit reduction.
The U.S. rating may be cut to AA within two years if spending reductions are lower than agreed to, interest rates rise or “new fiscal pressures” result in higher general government debt, New York-based S&P said Aug. 5.
In India and China, the world’s largest and second-biggest gold consumers, futures also reached records.
Bullion for October delivery advanced as much as 3.8 percent to a record 26,198 rupees ($580) per 10 grams on the Multi Commodity Exchange of India Ltd. and traded at 25,683 rupees. Gold climbed to an all-time high of 365.02 yuan a gram on the Shanghai Futures Exchange.
“People don’t have other real options for investment,” said Kishore Narne, head of research at Anand Rathi Commodities Ltd. in Mumbai. Gold may reach $1,840 to $1,850 an ounce in less than a month, he said.
“Perception-wise gold still looks positive.”
Record prices are hurting demand in India according to Rajesh Exports Ltd., the largest jewelry maker and exporter.
“Customers will take time to adjust to price levels,” Rajesh Exports Chairman Rajesh Mehta said yesterday. “The demand has been moderate in the previous month.”
Immediate-delivery silver fell 0.3 percent to $38.90 an ounce. Spot palladium dropped 1 percent to $711 an ounce, while platinum for immediate delivery shed 0.2 percent to $1,714.25, reversing an earlier gain of as much as 0.6 percent.
To contact the reporters for this story: Phoebe Sedgman in Melbourne at psedgman2@bloomberg.net;
Madelene Pearson in Mumbai at mpearson1@bloomberg.net
To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net 
