By Pham-Duy Nguyen
Feb. 25 (Bloomberg) — Gold, little changed today, may rise on speculation that the economy will worsen and the credit crisis will deepen, boosting the appeal of the precious metal as an alternative investment. Silver also was little changed.
The benchmark Standard & Poor’s 500 Index tumbled for the seventh time in eight sessions. Gold fell 2.6 percent yesterday as the S&P 500 gained 4 percent. Before today, gold had risen 9.6 percent this year, topping $1,000 an ounce for the first time since March on Feb. 20.
“Those who’ve not yet bought gold as insurance against economic chaos have their opportunity to do so now and we would strongly urge that,” Dennis Gartman, an economist and editor of the Gartman Letter in Suffolk, Virginia, told his clients today.
Gold futures for April delivery rose $1.30, or 0.1 percent, to $970.80 an ounce at 12:42 p.m. on the Comex division of the New York Mercantile Exchange. The price dropped 3.3 percent in the previous two sessions.
Silver futures for May delivery fell 0.1 cent to $14.03 an ounce in New York. Before today, the metal jumped 24 percent this year.
U.S. stocks fell after a report showed sales of previously owned homes unexpectedly declined in January, even as falling prices made them more affordable. Purchases fell 5.3 percent from December to an annual rate of 4.49 million, the fewest since 1997, the National Association of Realtors said today.
Widening Losses
Since the second half of 2007, banks worldwide have posted $1.1 trillion in writedowns and losses related to investments in subprime mortgages. The U.S. government has committed as much as $9.7 trillion to ease the credit crisis and recession.
President Barack Obama last night told Congress the U.S. economic crisis was an opportunity to solve some of the nation’s problems and signaled more taxpayer money would be needed to rescue the financial system.
Gold may gain as investors seek to preserve wealth as asset prices fall, and as government spending spurs future inflation, analysts said.
“The perception is that the economy is still pretty bad and that doesn’t change with just one speech,” said Frank McGhee the head dealer at Integrated Brokerage Services LLC in Chicago. “They’re trying to turn a very big boat. Gold benefits from the uncertainty and the recovery.”
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