Gold prices climb on mounting economic concerns

AP News
Posted: Aug 16, 2011 3:46 PM
Gold prices climb on mounting economic concerns

Gold prices moved higher Tuesday as concerns deepened about the slowing European economy.

Economic growth in Germany and France barely budged in the second quarter, according to a new European Union report. That could hurt the broader economy across the 17 countries that use the euro.

The news reinforced concerns about demand for commodities in Europe, which also is dealing with sovereign debt problems in several countries.

Gold for December delivery rose $27 to finish at $1,785 an ounce. The price has risen about 10 percent since Aug. 1, when worries began to mount about slower economic growth in Europe and the U.S.

Investors buy gold because it's seen as a relatively stable asset to hold during uncertain economic times. It's also used as a hedge against currency movements and inflation.

MF Global senior market strategist Rich Ilczyszyn is one of the analysts who believes gold could reach $2,000 an ounce, unless the global economy stabilizes and there is a clearer picture about growth in the months ahead.

"It's perception and it's a fear-based trade and a very emotional trade if you will," he said of gold. "I think at some point cooler heads are going to prevail and you'll probably see traders go back into equities in some way."

Other metals were mixed on the day.

Platinum and palladium, which are used in automobile catalytic converters, rose after the Federal Reserve said factory production increased 0.9 percent in July, the biggest gain of the year. The auto industry accounted for most of the increase.

September palladium rose $10.15 to finish at $756.50 an ounce and October platinum gained $20.90 to end at $1,818.10 an ounce. September silver added 51.2 cents to end the day at $39.819 per ounce.

Copper, which is used in many construction materials, fell after the Commerce Department said July's new home construction dropped 1.5 percent from June to a seasonally adjusted 604,000 homes. September copper lost 3.8 cents to finish at $3.994 a pound.

Wheat prices rose on concerns that the Northern Plains spring wheat crop would fall short of expectations, Global Commodity Analytics & Consulting LLC President Mike Zuzolo said.

About 13 percent of the wheat in Idaho, Minnesota, Montana, North Dakota, South Dakota and Washington had been harvested as of Friday, the U.S. Agriculture Department said. That compared with 31 percent at the same time last year.

About 66 percent of the crop was in good-to-excellent condition, compared with 82 percent a year ago, the agency said.

Wheat for September delivery added 12.25 cents to finish at $7.2475 a bushel, December corn rose 7.5 cents to $7.275 a bushel and November soybeans fell 1.75 cents to $13.495 a bushel.

Oil and other energy products were lower on concerns that demand may wane because of the slowing European economy.

Benchmark West Texas Intermediate crude for September delivery dropped $1.23 to finish at $86.65 per barrel on the New York Mercantile Exchange.

In other Nymex trading, heating oil lost 1.15 cents to finish at $2.9326 per gallon, gasoline futures dropped 2.07 cents to $2.8538 per gallon and natural gas fell 9.2 cents to finish at $3.932 per 1,000 cubic feet.