Gold rallied to its ninth record high this year Tuesday, as growing fears about the spread of the European debt crisis and the increasingly gloomy outlook for the US economy fed a broad investor push into perceived safe-haven assets. The most actively traded gold contract, for December delivery, climbed $22.80, or 1.4 percent, to settle at a record $1,644.50 a troy ounce on the Comex division of the New York Mercantile Exchange. The contract climbed as high as $1,646.80 an ounce, a record intraday high. “There's still concern about the weak economy, growth generally, weak (purchasing managers' indexes) in a range of countries,” said David Jollie, strategic analyst at Mitsui Global Precious Metals. US debt was only part of the story behind gold's recent rise, he added. The deal to avert a US debt default should have little effect on the Pentagon's huge budget in the short term, but leaves the door open to sharp cuts that could force a strategy overhaul, experts say. Signed into law by President Barack Obama Tuesday, the compromise lifts cash-strapped Washington's $14.3 trillion debt limit by up to $2.4 trillion, while cutting at least $2.1 trillion in government spending over 10 years. Defense spending, which has doubled since the 9/11 attacks and accounts for 20 percent of the overall federal budget, is already scheduled to be slashed by $400 billion over 12 years, according to plans unveiled by Obama in April. Some investors turn to gold as a refuge from turmoil in other markets, and the yellow metal has reached all-time highs for four consecutive weeks. The Swiss franc hit record highs against the US dollar and euro Tuesday and Treasury prices rose, highlighting the demand for a safe place to park cash. “People are concerned about what currencies they hold,” said Sterling Smith, a market analyst with Country Hedging. “Risk aversion is growing stronger.” Sentiment in the gold market also received a boost from the news that South Korea's central bank made its first gold purchases in 13 years. The bank acquired 25 tons of gold during June and July, bringing its total reserves to 39.4 tons at the end of last month. Central banks have been moving to reduce their dependence on the US dollar, the world's chief reserve currency. In other precious metals, silver was up 1.1 percent at $39.68 an ounce, while the platinum group metals were modestly higher, with platinum up 0.1 percent at $1,790.24 an ounce and palladium up 0.1 percent at $826.22 an ounce. Gold has rallied by some 15 percent so far this year, hitting record highs in dollars, euros, sterling, rand and Canadian dollars, indicating investors' distrust of volatile currencies.
