By: Reuters
Gold volatility climbed as Republicans pressed ahead with a deficit plan that cannot pass Congress and President Barack Obama told lawmakers to stop wasting time. The metal could tumble if a debt-ceiling deal eases fears in other financial markets, analysts said.
Gold hit another all-time high Friday as investors sought a safe haven, after anemic U.S. growth data raised the prospect of recession if a deadlock over Washington's debt fails to be resolved quickly.
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Tom Grill | Iconica | Getty Images |
Bullion hit its third record in five days, notching a near 9 percent gain for July, after Friday's GDP data showed the U.S. economy stumbled badly in the first half of 2011 and came dangerously close to contracting in the January-March period.
"The weak economic data suggests that you may see some form of stimulus, certainly highly accommodative monetary policies, and that will continue to put a bid on gold prices," said Mark Luschini, chief investment strategist of broker-dealer Janney Montgomery Scott, which oversees $54 billion in assets.
"As long as there is no re-normalization of a steady state of economic or fiscal circumstances, gold will move higher."
Spot gold [XAU= 1624.60 
-1.54 (-0.09%) 
] touched an all-time peak of $1,632.30 an ounce, and was up 0.5 percent at $1,623.99.
-1.54 (-0.09%) ] touched an all-time peak of $1,632.30 an ounce, and was up 0.5 percent at $1,623.99.On weekly charts, CitiFX strategists said bullion's monthly close above $1,557.75 indicates that July is a bullish outside month, confirming a 2011 target between $1,700 and 1,750.
The U.S. December contract [GCCV1 1631.20 
15.00 (+0.93%) ] settled up $15 at $1,631.20 an ounce. Futures ![[cnbc explains]](https://lh3.googleusercontent.com/blogger_img_proxy/AEn0k_syuYBtGzjLe8W9Fk5fClOhG790s5E89cRSuW3RHwMqiRksLq52k-NOFdOq-9qbu1LZWEo5515kuLjaEysCN_Tv0zez3m3d3WE371DMOLEgZipK83xMKPJv1Feei9Y7e-Ta5avWsVzofCeFoagMOlTMk3L6qfleILyaVd9LTpuCMy2iNX1jDnEOl0cKtBcqew=s0-d)
volumes were lower than the last several sessions, as most investors had completed contract rollover ahead of the August contract's first-notice day on Friday.
15.00 (+0.93%) ] settled up $15 at $1,631.20 an ounce. Futures volumes were lower than the last several sessions, as most investors had completed contract rollover ahead of the August contract's first-notice day on Friday.Silver [XAG= 39.83 0.01 (+0.03%) ] rose 0.8 percent to $39.97 an ounce, but was off a more than two-month high of $41.42 hit this week. It posted a gain of around 15 percent for July, its best month since April.
0.01 (+0.03%) ] rose 0.8 percent to $39.97 an ounce, but was off a more than two-month high of $41.42 hit this week. It posted a gain of around 15 percent for July, its best month since April.The CBOE Gold ETF Volatility Index, which is often referred to as the "Gold VIX" and is based on SPDR Gold Trust options, rose to its highest in over two months, as the market braced for a swift pullback following the rally.
Investor unease can also 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.
Debt Unease, Recession Fears
U.S. output increased at a 1.3 percent annual pace in the second quarter as consumer spending barely rose. Other U.S. economic data this week also pointed to a slower economic growth for the rest of the year.
"The catalyst to drive gold higher right now is the debt ceiling, but the underlying fundamental reality is the growing risk of a 2012 recession," said James Dailey, portfolio manager of TEAM Financial Asset Management, which oversees $200 million in assets. (Click here for our Live Blog: Countdown to Debt Ceiling 'D-Day')
ceiling, but the underlying fundamental reality is the growing risk of a 2012 recession," said James Dailey, portfolio manager of TEAM Financial Asset Management, which oversees $200 million in assets. (Click here for our Live Blog: Countdown to Debt Ceiling 'D-Day')Republicans in the House of Representatives said they expected to vote on Friday on a retooled deficit-reduction measure to raise the $14.3 trillion debt ceiling with four days left before the Aug. 2 deadline.
Peter Schiff, CEO of Euro Pacific Precious Metals, said that a ratings downgrade on U.S. debt means the world's largest institutional investors must immediately sell off their U.S. Treasury holdings, and gold would be the best refuge asset for the funds.
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 some of the region's bigger economies.
Labor strife in South Africa was being closely watched by the market, with talks to resume on Monday between gold mine workers and the major producers aimed at ending a strike. The impact of supply outages on gold is usually fairly soft, given the availability of above-ground stocks.
Spot platinum [XPT= 1811.00 37.00 (+2.09%) ] was down 0.3 percent at $1,777.24 an ounce.
37.00 (+2.09%) ] was down 0.3 percent at $1,777.24 an ounce.Palladium [XPD= 840.00 15.07 (+1.83%) ] eased 2 cents at $823.73 an ounce, but the metal notched a monthly rise of nearly 10 percent, its biggest this year.
15.07 (+1.83%) ] eased 2 cents at $823.73 an ounce, but the metal notched a monthly rise of nearly 10 percent, its biggest this year.Copyright 2011 Thomson Reuters. Click for restrictions.
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