Gold miners jump on risk aversion

[miningmx.com] — JSE-listed gold mining stocks surged in early trade on Wednesday as investors took shelter from the deteriorating global economic outlook and Europe’s worsening debt crisis.

The index of gold miners rose as high as 2.2% soon after the open. It was up 1.6% 09:18.

Harmony Gold was trading 3.6% at R99.99 and AngloGold Ashanti was 2% higher at R296.01.

Gold climbed to a record high for the second straight day and oil fell on Wednesday as concerns over the fragile US economy and a widening euro debt crisis drove investors away from riskier assets.

Completion of a last-gasp deal to avoid a US default failed to bring any relief, as markets focused instead on how Washington’s efforts to cut spending could slow growth at a time when global industrial activity was already sluggish.

The size of the US debt remained a concern for ratings agency Moody’s. Moody’s retained its triple-A rating for the United States but assigned it a negative outlook, underscoring the threat of a future downgrade that would drive up the cost of borrowing.

“The deficit is still a big problem and that is creating financial fear,” said Ken Hasegawa, a commodities derivatives manager at Japan’s Newedge brokerage.

“Even if the debt ceiling issue in the United States has been cleared, that is only successful in that it avoids a default.”

Spot gold rose to an all-time high of $1,661.14, hitting its ninth record in 16 trading sessions and up nearly 17% so far this year as investors flocked to the safe haven.

“The momentum in gold in the short term will continue to run strong, supported by worries about global economic growth, gold purchases by South Korea’s central bank announced yesterday and rises in SPDR Gold Trust holdings,” said Li Ning, an analyst at Shanghai CIFCO Futures.