(Updates prices, adds comment)
* Gold tops $1,715/oz as investors shun equities
* ETF flows continue to rise
* Platinum/gold ratio at 3-3/4 year low
By Amanda Cooper
LONDON, Aug 8 Gold vaulted above $1,700 an ounce
for the first time on Monday after pledges by the G7 and the
European Central Bank to quell the turbulence in the financial
markets did nothing to put investors at ease.
Traders said the ECB had made good on its promise to tackle
the euro zone debt crisis by widening its bond-buying programme
to include paper from Spain and Italy but the move was
not enough to allay deep concerns.
Friday's downgrade to the quality of U.S. sovereign debt by
ratings agency Standard & Poor's had been widely anticipated,
but its longer-term impact on anything from mortgage rates to
the economy was unclear.
Spot gold was set for a second consecutive daily
trading rally, up 2 percent from Friday at $1,696.56 an ounce by
1342 GMT, having hit a record $1,715.01 earlier and having
traded at all-time highs in sterling and euros
"We are so much more reliant now on what our macroeconomists
are telling us. They had a view that we wouldn't be moving back
into recession and that growth would accelerate into next year,
but events are changing quite quickly," said Deutsche Bank
analyst Michael Lewis.
"The main beneficiary will continue to be gold," he added.
Investors have bought more gold in the last month than in
the prior six months, judging from the increase in open interest
on COMEX for speculators and money managers, as well as inflows
into exchange-traded products.
According to data from the Commodity Futures Trading
Commission, which collects information on holdings of futures
and options, and to exchange traded product collected by
Reuters, investors bought more than 18 million ounces of gold in
the last month alone.
This corresponds to around 30 percent of total identifiable
investment demand in 2010, and compares with about 8.4 million
ounces in the year to early July.
Saxo Bank senior manager Ole Hansen said the rise in gold
could be jerky.
"There has been a huge build-up in speculative and long
positions across the board over the last couple of weeks, but I
suppose that central banks buying more bonds is not helping the
overall worry about how the economies are going to do over the
months ahead," he said.
Finance chiefs from the world's industrial powers pledged
on Sunday to take whatever actions were needed to steady
financial markets, spooked by the political wrangling in Europe
and the United States over slashing their huge budget deficits.
FED MEETING AWAITED
Investors will be watching Tuesday's meeting of the U.S.
Federal Open Market Committee for any statement on whether the
Fed will ease monetary policy further.
The Fed's $600 billion quantitative easing programme, which
ended in June this year, has been instrumental in gold's rise,
even if adjusted for inflation, the bullion price remains well
below the all-time highs above $2,000 in the early 1980s.
The prospect of an even longer period of low U.S. interest
rates prompted Goldman Sachs to raise its longer-term
forecast for the gold price. Goldman said it had lifted its
forecasts to $1,645, $1,730 and $1,860 on a three-, six- and
12-month horizon. Goldman had previously forecast the gold price
peaking at $1,600 an ounce in mid-2012.
Meanwhile, gold in euros hit a record 1,199.89
euros an ounce, bringing gains in the last month alone to over
12 percent, while gold in sterling hit a peak of
1,043.76 pounds, for a gain of 9.3 percent in the same period.
In other precious metals, silver got a lift from the
strength in gold as it can sometimes act as a cheaper safe-haven
proxy for investors.
Spot silver was last up 2.6 percent on the day at $39.30 an
ounce, while platinum rose 0.3 percent to $1,717.49 an
ounce. The ratio of gold to platinum earlier fell to around
parity for the first time since late 2008.
Palladium was last down 1.25 percent at $730.47. The
palladium price has fallen by more than 14 percent in the last 6
trading days, since hitting a five-month high.
(Additional reporting by Jan Harvey; editing by Anthony Barker)