Gold Futures Rally Amid Heightened Fears

Gold futures (NYSE:GLD) jumped $30.10 an ounce today, up 2%, the commodity’s biggest one-day dollar and percentage gain in the last eight months. Gold for August delivery had dropped $27.80 in the last two days of regular trading.

As debt problems in the U.S. and in Europe persist, currency volatility and political instability cause gold futures to rise as investors look for a safe-haven for their money to weather the storm. When Greece didn’t default, gold (NYSE:GLD) futures dropped, but as Greece continues to “simmer” as one broker puts it, it keeps the price of gold from falling too drastically off its recent highs.

S&P (NYSE:MHP) said Monday that the current proposal to roll over Greek debt by French banks would probably result in a “selective default”. The European Central Bank says they will continue to accept Greek government bonds as loan collateral as long as no credit-ratings firms like S&P consider Greece to be in default.

In the U.S., future economic uncertainty continues as President Obama and members of Congress continue the debate over raising the $14.3 trillion debt ceiling. Also potentially pushing up gold futures is the Indonesia mining strike, which could create short-term shortages, as well as worries over China (NYSE:FXI) as Moody’s (NYSE:MCO) announced today that 8% to 12% of loans extended by Chinese banks could soon be classified as nonperforming, and the expectation that the ECB will increase interest rates this week. On top of all that, last Friday’s U.S. jobs report showed that unemployment continues to grow.

But despite all that bad news stirring up fears, gold (NYSE:GLD) should still settle back down below $1,500 later this month, as the global economy, as a whole, has been demonstrating growth of late. And silver (NYSE:SLV), which is also up today, can also be expected to drop as current debt issues are resolved.

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