Gold rose to a six-week high as investors bought the metal as a haven and a hedge against inflation, after escalating violence in the Middle East pushed crude oil to a record, according to Bloomberg.
Gold has jumped 8.4 per cent this month, after falling in May and June, as bombings in India and North Korea's missile tests led to increased demand for the precious metal. Gold and Treasuries rallied and global equity markets declined as investors sought safety for their money. Israel's air force struck targets in Lebanon for a third day.
``People are moving out of riskier assets, and into treasuries as well as gold,'' said David Holmes, director of precious metals at Dresdner Kleinwort Group in London. ``Investor demand for gold has pushed the price higher.''
Gold for August delivery rose $13.60, or 2.1 per cent, to $668 an ounce on the Comex division of the New York Mercantile Exchange, after reaching $669, the highest for a most-active contract since May 30. Gold for immediate delivery rose $6.90, or 1 per cent, to $666.95 at 7:05 p.m. in London, up 6 per cent this week.
The Standard & Poor's 500 Index fell for a third day, down 0.7 per cent to 1233.8 at 2:11 p.m. in New York, and the Dow Jones Industrial Average fell 1.1 per cent to 10726.41.
Crude oil for August delivery rose 85 cents to $77.55 a barrel on the New York Mercantile Exchange, after earlier trading at a record $78.40. Oil has rallied 34 per cent in the past year.
``We also see buying in oil,'' Holmes said. Oil and gold markets ``are responding to the political uncertainties in the Middle East,'' he said.
Some investors buy gold as a store of value. Gold futures rose to $873 an ounce in 1980, the highest ever, after oil costs more than doubled and consumer prices reached 12 per cent.
``Flight-to-safety buying has been a major catalyst in gold's gains this week and is likely to be a feature next week,'' said James Moore, a Kettering, U.K.-based analyst at TheBullionDesk. Tensions in the Middle East and North Korea ``are likely to deepen before some form of agreement is met.''
As oil approaches $80, gold may be headed for $680, said Moore, who recommends buying gold next week.
Gold climbed 2.2 per cent last week in London as North Korea test-fired missiles into the Sea of Japan. Bullion surged 5.3 per cent on Sept. 11, 2001, the first day of trading after terrorists attacked the U.S.