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Gold prices rise above $1700

08 August 2011 08:43 (UTC +04:00)

Gold futures for delivery in December GC1Z +3.81% spiked $54.10, or 3.3%, to $1,705.90 an ounce in electronic trading during Asian hours on Monday, more than recovering the losses it made in a regular session on Friday. Spot gold also climbed $41.70, or 2.5%, to $1,705.10.

Gold futures went as high as $1,718.20 an ounce during the session.

The latest rally came in the wake of S&Pâ€™s downgrade Friday of U.S. credit ratings to AA+ from AAA. A decline in the U.S. dollar and hefty losses in Asian stocks aided the surge.

â€œThe downgrade will no doubt weigh further on the already very negative sentiment towards the [U.S. dollar] and accelerate the pace of reserve diversification fromâ€ the greenback, Bank of America Merrill Lynch analysts wrote in a strategy note to clients.
However, they also said the short-term impact on the U.S. dollar would depend on the performance of risk assets in reaction to the S&P decision.