Gold rose sharply in the U.S. session to hit a seven-week high as uncertainty in global markets and fluctuations in currency market lifted demand for the precious commodity as investors flee to an alternative investment, a safe haven asset.
The optimism in the build up to the Greek confidence vote has now died down and investors are back to worrying about the next hurdle Greece will face, despite one hurdle being overcome. The most important hurdle is still to avoid debt default. The Euro fell against the Dollar on speculation that the Greek government will struggle to pass austerity measures to avoid a default.
Spot gold rose to a high of $1,557.88 at 14:40 GMT from the US session open price of $1,541.73, marking the highest level in seven weeks, the longest rally since April. Meanwhile, gold priced in Sterling rose to a record high today.
Before today, gold climbed 25 percent in the past 12 months as escalating sovereign-debt woes and record-low U.S. borrowing costs increased the appeal for the precious metal as an alternative to currencies.
“Gold is in a unique position of being able to go higher, despite a stronger dollar, which is a very bullish signal,” said Matthew Zeman, a strategist at Kingsview Financial in Chicago. “A lot of nations are running deficits that are not sustainable in the long run. There comes a point where people just don’t believe in paper currencies.”