Gold Soars most since 1999Gold Soars Most Since 1999 as Investors Seek Haven From Turmoil
By Pham-Duy Nguyen
Sept. 17 (Bloomberg) -- Gold surged the most in nine yearsas investors sought the safety of precious metals on concernthat the credit crisis will deepen, leading more financialinstitutions to fail. Silver soared the most since 1995.
Equities tumbled even after the Federal Reserve took overthe biggest U.S. insurer. The cost of borrowing dollars forthree months jumped the most since 1999 as banks hoarded cash.Central banks in the Phillipines and Venezuela said they may buygold. In March, the metal reached a record as the governmentsteered JPMorgan Chase & Co. to buy Bear Stearns Cos.
``With paper assets in question, gold represents thetextbook storehouse of value,'' said Ron Goodis, the futurestrading director at Equidex Brokerage Inc. in Closter, NewJersey.
Gold futures for December delivery gained $66.10, or 8.5percent, to $846.60 an ounce at 1:17 p.m. on the Comex divisionof the New York Mercantile Exchange. A close at that price wouldmark the biggest percentage gain for a most-active contractsince Sept. 28, 1999. Gold reached a record $1,033.90 onMarch 17.
Silver futures for December delivery rose 96.3 cents, or9.2 percent, to $11.48 an ounce. A close at that price wouldmark the biggest gain since March 30, 1995.
Before today, gold fell 6.9 percent this year, while silvertumbled 30 percent.
About $2.8 trillion of market value was erased from globalstocks this week as Lehman Brothers Holdings Inc. filed forbankruptcy, Bank of America Corp. purchased Merrill Lynch & Co.for $50 billion, and the U.S. government took control ofAmerican International Group Inc. in an $85 billion takeover toprevent the biggest financial collapse ever.
Russian Banks
Russia halted stock trading for a second day and poured $44billion into its three biggest banks in a bid to halt the worstfinancial crisis in a decade.
``You're sorting out, by process of elimination, that goldis the asset you'd rather own,'' said Greg Orrell, who managesthe OCM Mutual Fund at Orrell Capital Management Inc. inLivermore, California. ``It's the currency you'd prefer.''
U.S. Treasury three-month bill rates dropped to the lowestsince at least 1954. Investors pushed the rate as low as 0.0304percent.
``It's not even worth it to keep money in the bank,'' saidJohn Licata, the chief investment strategist at Blue PhoenixInc. in New York. ``Gold is going to be the beneficiary of aglobal move toward a safe haven.''
Reserve Primary Fund, the oldest U.S. money-market fund,yesterday became the first in 14 years to expose investors tolosses after writing off $785 million of debt issued by Lehman.
`Systemically Scary'
``That's systemically scary,'' said Frank McGhee, the headdealer of Integrated Brokerage Services LLC in Chicago. ``Unlessyou put gold in your backyard, you have to trust your money toan institution.''
Gold's gains accelerated after prices topped $800, analystssaid.
``There are going to be more banks that will fail,'' saidMatt Zeman, a metals trader at LaSalle Futures Group Inc. inChicago. ``This is the time when people want to buy gold.''
London-based researcher GFMS Ltd. said gold may rise to$950 by the end of the year as central banks and miningcompanies hold back sales and investors buy the metal as a havenagainst falling equities.
Since the second quarter of 2007, banks worldwide haveposted $515.5 billion in losses and writedowns related toinvestments in subprime mortgages. The Fed has also engineered$200 billion in takeovers for Fannie Mae and Freddie Mac, thebiggest providers of financing for U.S. homes.
Central Bank Buyers
The world's central banks, already the biggest holders ofgold, may look to the metal as an alternative reserve asset tothe dollar, said Dennis Gartman, an economist and the editor ofthe Gartman Letter in Suffolk, Virginia. Until today, Gartmanhad been bearish in his outlook for gold.
Venezuela said today it may buy 15 metric tons of gold ayear to develop investment products, including coins. At aconference in London, Maria Ramona Gertrudes Santiago, themanaging director of the treasury at the Phillipines CentralBank, called gold a ``perfect hedge.''
To contact the reporter on this story:Pham-Duy Nguyen in Seattle atpnguyen