Gold jumps to record high

Gold hit record highs on Friday after weak economic growth data from the United States raised the prospect of further monetary easing and a weaker dollar, while the impasse over the country's debt ceiling reinforced positive sentiment. Spot gold touched an all-time peak of $1,632.16 a troy ounce, a gain of about 8 percent so far this week and 14.3 percent so far this year.
It was bid at $1,628.80 a troy ounce by 1401 GMT, up 0.8 percent from $1,616.35 an ounce late in New York on Thursday. The latest trigger came from data showing the US economy grew less than expected in the second quarter while growth in the previous quarter was sharply revised lower. "It was quite a bad release and it raises hopes that there will be more monetary easing in the form of quantitative easing and that's positive for gold as an investment asset," said Matthew Turner, precious metals analyst at Mitsubishi. More signs of weak growth came from a release showing business activity in the US Midwest grew less than expected in July.
Further easing would hit the dollar, which when it falls, makes commodities cheaper for holders of other currencies. Loose monetary policy in the United States in recent years has weighed on the dollar and boosted gold, which investors also use as a hedge against inflation and political and economic uncertainty - a dominant theme in markets at the moment. "We very much see precious prices as being part of a liquidity-fuelled bubble, whether you call it debt monetisation or quantitative easing or just holding interest rates at abnormally low levels," said Nic Brown, analyst at Natixis.
Focus was also on debt talks in the United States, where Republican leaders were scrambling to rescue their budget deficit-cutting plan after conservatives mounted a rebellion that heaped uncertainty on efforts to avert a catastrophic debt default. Debt troubles in the euro zone were also on investors' radar screens, after ratings agency Moody's put Spain on review for possible downgrade, raising fears of an escalation of the debt crisis in the region's peripheral economies. The dollar fell to a four-month low against the yen and hovered near record lows versus the Swiss franc.
Investor unease can be seen in the holdings of the world's largest gold-backed exchange-traded fund, SPDR Gold Trust , which rose 1.5 percent on Thursday from a day earlier to a six-month high of 1,262.98 tonnes by July 28. Labour strife in South Africa was closely watched by the market, with gold mine workers and the major producers scheduled to meet on Friday for talks aimed at ending a strike.
The impact of supply outages - particularly short-term ones - on gold is usually fairly soft, given the availability of above-ground stocks of the metal relative to other commodities. However, the strike could give more of a lift to platinum prices if it spreads to that sector.
Around four in every five ounces of platinum is sourced in South Africa, so supply disruptions in the republic have a significant effect on metals prices. South African supply outages were a major factor driving platinum to a record $2,290 an ounce in early 2008. Spot platinum was flat at $1,780.99 an ounce.
Spot silver rose 0.5 percent to $40.19 an ounce, but was off a more than two-month high of $41.42 hit this week. It was set to rise nearly 14 percent in July, its best month since April. Spot palladium added 0.1 percent to $823.75 an ounce, and is heading for a monthly rise of nearly 10 percent, its best this year.