Gold jumps as stocks slide

Gold has rallied over $30 today as dealers have taken their cash out of stocks and invested in the precious metal.

Gold is trading at $1318, up 2.8% on the day, after the US government managed to raise its debt ceiling to avoid defaulting.

Traders are flocking to the safe haven because they are worried that the US’s credit rating will be downgraded. Standard & Poor’s lowered its rating from AAA to AA in the summer of 2011 when the government last raised the country’s debt limit; ratings agency Fitch have now suggested they might do the same. Since the debt ceiling debate has effectively been postponed until February 2014, between now and then we could see equities lose more ground and gold make increased gains.

A survey at the financial news provider Bloomberg, however, has suggested that gold will continue to decline over the next four quarters and could fall to $1175 this time next year. The participants of the survey felt that a reduction in the US stimulus package will lower demand for the metal.

Spot gold chart

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