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Gold Near $1500 on SandP Outlook for U.S. Debt

Release Date: 
Tuesday, April 19, 2011

April 19, 2011

The price of gold traded just below the $1,500 mark on Tuesday, bolstered by a Standard & Poor's warning on U.S. government debt on Monday that sent investors to safe haven assets. The metal traded at $1492.00 per ounce at 7:34 a.m. Pacific Time on the New York Spot Market after earlier hovering in the $1498.00 range. Analysts at Archer Financial, Kingsview Financial and Integrated Brokerage Services commented on the credit outlook and the U.S. dollar, which generally supports gold prices when it falls in value relative to other currencies.

Standard & Poor's changed its long-term credit outlook for U.S. debt from stable to negative citing "material risk that policy makers won't reach an accord on "medium- and long-term budgetary challenges. "There certainly has always been that lingering concern over U.S. debt and the S&P people are finally identifying the threat, Stephen Platt, an analyst at Archer Financial in Chicago. "The world is awash in liquidity. Gold's slow, grinding action upward shows the deterioration in the dollar, excess liquidity and deficit problems are still in force.

"The odds are increasing that we're going to see a credit downgrade in the next few years, said Matthew Zeman, a strategist at Kingsview Financial in Chicago. "More and more people are looking to gold as the ultimate currency.

"The perception that a downgrade would even be possible for the U.S. is driving the gold market, said Frank McGhee, the head dealer at Integrated Brokerage Services LLC in Chicago. "The dollar is going to get whacked. "People are looking at inflation and at deficits and feeling there's no way to get out of this without the debasement of the currency, Zeman of Kingsview said.

(Sources: "Gold Rises to Record $1,498.90 an Ounce as Weakening Dollar Stokes Demand, Bloomberg, April 19, 2011; "Gold Futures Climb to Record After S&P Revises U.S. Outlook to Negative, Bloomberg, April 18, 2011)

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