[miningmx.com] — GOLD slipped on Friday though it was on track to match its biggest winning streak in four decades, with debt crises in the euro zone and the United States leaving investors few alternatives but to keep piling into the metal.
The dollar initially slipped against the euro after Standard & Poor’s warned there was at least a 50% chance it will downgrade the US credit rating, but with stress-test results of European banks due later, traders were reluctant to make big bets.
Earlier this week, Moody’s warned of a possible US downgrade.
Though the recent flurry of warnings by ratings agencies is widely seen as a move to prod the US government to end a looming debt deadlock, Todd Elmer, a FX strategist at Citigroup, said S&P’s emphasis on the need for a more sustainable medium-term fiscal path posed a more formidable challenge.
“This presents a much higher hurdle for policymakers and, as such, represents a more serious threat to the US dollar,” Elmer said in a note.
The euro hit an intraday high of nearly $1.42 versus the dollar after the S&P announcement before trimming some of its gains to settle back at $1.4183.
Against the low-yielding yen, the greenback was trading at 79.14 yen, though some short-covering demand after this week’s sharp drop and before the weekend is expected to lend strong support to the pair at around 78.50.
Other US assets like Treasuries were relatively unmoved on the S&P news as investors bided their time before an emergency meeting later in the day of among euro zone policymakers, which may mark a turning point to the crisis.
Officials are demonstrating a greater urgency in tackling the crisis after a recent spike in Italian and Spanish bond yields, and further downgrades of the credit ratings of Portugal and Ireland, made it clear that the lack of a comprehensive solution threatened to drag bigger countries into the debt crisis.
Gold was just a strike away from a record $1,600 an ounce after a nine-day rally pushed prices up as much as 7%. Silver held just below a two-month high of $39.34 hit in the previous session.
