Gold rallies to a new historic high on U.S. credit rating cut

Gold surged after the bullish opening gap seen today, where the shiny metal closed the session on Friday at $1663.50 per ounce, however opened in the Asian session today at $1678.45 supported by the downbeat act from Standard & Poor's which downgraded the world's largest economy's top credit rating of triple A to AA+ pushing the yellow metal to continue the upside journey, achieving new tops and setting the highest historical record ever.

Demand for haven surged due to the rising fears and concerns regarding the world's largest economy, in addition to the risky attempts of the European central bank to solve the debt-crisis, where the president, Jean Claude Trichet, said that the bank is ready to start buying Spanish and Italian bonds, aiming at lowering the yields on debt, and trying to solve the debt crisis and to prevent it from expanding to other countries after Greece, Ireland and Portugal were bailed out by the Euro zone and the International Monetary Fund.

As we expected before, the metal inclined sharply during the past week to breach the level of $1700 per ounce, extending the gains for the fifth week. The shiny metal advanced big time on the European debt crisis and rising U.S. debt-ceiling concerns.

Gold jumped today after the opening in the Asian session at $1678.45 an ounce, to set a new historic peak at $1714.59 per ounce, however, the metal didn't trade below the opening level and is currently trading around $1701.39 an ounce.

After U.S. lawmakers fought hard to reach to an agreement in order to raise the current debt ceiling of $14.3 by $2.1 trillion, and approved on spending cuts in order to reduce the budget deficit within the coming 10 years by $2.4 trillion, Standard & Poor's rating agency still downgraded the U.S. top credit rating of AAA to AA+ as the Agency sees that this downgrade reflects our opinion that the fiscal consolidation plan that Congress and the Administration recently agreed to falls short of what, in our view, would be necessary to stabilize the government's medium-term debt dynamics. In addition the rating agency preferred $4 trillion of spending cuts higher than the approved of $2.4 trillion, which supported the agency's decision to cut the U.S. rating, forcing positive pressures on the shiny metal to extend the upside journey further and to trade higher.

In Europe, the European Central Bank president, Jean Claude Trichet, explained in a statement the readiness and willingness of the bank to start buying Spanish and Italian bonds after the yields jumped to high records in order to support both of the nations as the bank takes the first step into active implementation of the Bond Purchasing Program. In addition, Trichet also explained in the statement that all government in the zone should follow this step as agreed on July 21.

This risky attempt to contain the European debt crisis has supported the yellow metal further, in addition to the downbeat global growth outlook, which also affected the metal to incline, where these factors alongside with the U.S. credit rating downgrade has supported demand for the safe haven more and more in the time investors are holding the metal to protect their wealth, and after the heavy losses seen across the board before two session, which led the heavy profit taking wave on gold, however this seemed to be a downside correction that gold performed and then continued the bullish movement.

Among other precious metals, silver also surged today recovering some of the heavy losses incurred in the past two sessions, where the metal opened the session today at $38.68 per ounce, recording the high of $40.33 and the low of $38.19, and is currently hovering around $39.96 per ounce.

Platinum also inclined today after the opening at $1710.00 per ounce, to recorded a high of $1722.00 and a low of $1696.00, and trades currently around its high level at $1722.00 an ounce