Gold surged to new record highs this week, hitting US$1,250/oz at one point before retreating back to US$1,230/oz on Friday. The yellow metal remained a hot commodity amid yet more instability in global equity markets and the ongoing debt crisis in Europe, which has prompted investors to pour money into precious metals, now seen as safe haven assets.
Gold used to be seen as an alternative investment to the US dollar and normally moved inversely to the American currency and also in tandem with the euro. Now, however, gold keeps defining this trend.
The European fiscal crisis culminated two weeks ago when a round of austerity measures introduced by Greece to comply with the demands of the European Union and the International Monetary Fund (IMF) and secure a multi-billion bailout package led to mass protests throughout the country that resulted in three deaths and raised questions about the viability of such measures and also about the possible impact of lower budget spending on the economies of Greece and other euro zone states facing similar problems, including Spain and Portugal.
In order to tackle the problem, the EU agreed on a €750 billion rescue fund to ensure the stability of Europe’s single currency, which has been under increasing pressure as Greece’s debt woes unravelled. This added optimism to the markets, yet failed to immediately get the euro back on track with worries over the negative impact of euro zone’s soaring debts persisted.
Adding to the appeal of gold and other precious metals was the monstrous 1,000 point fall of the Dow Jones Industrial Average this week, apparently caused by Citi’s (NYSE: C) accidental sale of US$16 billion instead of US$16 million worth of e-mini S&P futures contracts.
Other precious metals followed the trend. Silver and platinum rallied to US$19.34/oz and US$1,717/oz respectively.
Mining stocks did very well this week with Randgold Resources (LSE: RRS) jumping from 5,580 pence to 6,010 pence and fellow gold miner from the FTSE 250 Petropavlovsk (LSE: POG) improving from 1,167 pence to 1,228 pence.
Silver miner Fresnillo (LSE: FRES) rose from 800 pence to 886 pence, while midcaps Hochschild Mining (LSE: HOC) climbed from 236 pence to 285 pence. Lonmin (LSE: LMI) inched higher from 1,690 pence to 1,693 pence, while peer from the FTSE 250 Aquarius Platinum (LSE: AQP) rose from 366 pence to 414 pence.