Gold granules fall from a chute at the Perth Mint Refinery, operated by Gold Corp., in Perth, Australia, on Aug. 9. Photo: Carla Gottgens/Bloomberg News
Gold prices surged alongside other safe-haven assets on Tuesday as worries about Italian political instability rippled through financial markets.
Front-month gold for October delivery rose 1.3% to $1,202.40 a troy ounce on the Comex division of the New York Mercantile Exchange. Prices have fallen 8% this year, hurt by a stronger dollar and worries that higher interest rates will lower investor demand for the haven metal. Gold struggles to compete with yield-bearing assets when rates rise.
But on Tuesday, analysts said anxiety about Italy’s antiestablishment government supported safer assets across the board, with gold rallying alongside the dollar and Treasurys.
Claudio Borghi, a lawmaker for the coalition League party, said in a radio interview that Italy “would resolve the vast majority of its [economic] problems” if the country had its own currency.
The comments followed a government announcement last week of a budget plan that investors fear has put it on a collision course with the European Union.
Should the European Commission reject the draft budget, “this could ignite a new crisis of confidence in the eurozone, similar to those caused by Greece in 2010 and above all by Spain and Italy in 2012, when the continued existence of the euro was seriously questioned,” Commerzbank analysts said in a note to clients.
Some analysts still expect gold to struggle moving forward with the Federal Reserve expected to continue gradually raising interest rates and economic growth in the U.S. steady. Still, some said investors covering short positions could provide further short-term boosts to the beaten-down market.
Among base metals Tuesday, front-month copper for October delivery rose 0.8% to $2.7950 a pound, after falling in four of the previous six sessions. Prices are still down 15% from their June four-year highs but have rebounded lately with investors anticipating that the U.S. and China will resolve their monthslong tariff fight.