Gold didn’t take long to recapture the US$1,400/oz level it lost late in yesterday’s session.
Safe haven demand increased amid worries over Ireland’s debt problems, prompting investors to pour more money into gold.
It has been speculated that the government may not be able to pass the budget and reduce the deficit, which could force it to request financial aid from the European Union.
President of the World Bank Robert Zoellick wrote an article for the Financial Times, arguing that the US dollar should be replaced with a basket of currencies to use as standard, also calling for gold to be a part of what he referred to as “a new co-operative monetary system”.
Zoellick called gold an “alternative monetary asset”.
Gold prices received a major boost earlier this month when the Federal Reserve announced a US$600 billion stimulus package in an attempt to drive up inflation to spur the slowing economic recovery. The move increased gold's appeal as an alternative investment to the US dollar and an inflation hedge.
The American currency continued rising today, curbing gains in the yellow metal.
Gold and silver advanced to US$1,402/oz and US$27.72/oz respectively, while platinum fell to US$1,759/oz.
Major mining stocks were in decline today. Platinum producer Lonmin (LON:LMI) and silver miner Fresnillo (LON:FRES) lost about 2.5%, as did Randgold Resources (LON:RRS), while fellow gold producer African Barrick Gold (LON:ABG) retreated 1.3%.
Midcaps followed. Aquarius Platinum (LON:AQP) and silver producer Hochschild Mining (LON:HOC) declined 2.3% and 3% respectively. Gold producer Petropavlovsk (LON:POG) declined marginally.
Turkey focused gold exploration and development company Ariana Resources (LON:AAU) was among the top performers in the sector with an 11% gain. Other notable risers among the small caps included Turkey and Saudi Arabia operating gold explorer KEFI Minerals (LON:KEFI) and Latin America operating gold and silver explorer Patagonia Gold (LON:PGD), which advanced 9% and 6.5% respectively.