Gold is surging to record highs in morning trade as its safe haven status continues to shine amid worries about Europe's fiscal health. The latest austerity measures by Portugal and Spain in order to keep their deficits under control have increased worries not only about a contagion effect of Greece's sovereign debt crisis spreading across the euro zone, but also have led investors to fret about the impact of the austerity measures on economic growth.
Portugal and Spain have both taken preemptive measures to rein in their massive deficits by announcing hefty tax increases across the board, from businesses to personal income. The measures, however, have increased near-term fears about the euro zone's prospects, and have pushed investors to seek refuge in alternative assets including gold. The euro certainly has taken a beating, as the dollar continues to gain against the European unit.
At 0805 ET, gold is up 1.6% at $1,248.40 an ounce, while silver is 0.9% higher at $19.67 an ounce, and copper is down 2.0% at $3.16 a pound.
Canada's International Tower Hill Mines Ltd ( ITH ) said it plans to spin off select assets to create a new company focusing on exploration. ITH will retain all assets in Alaska's Livengood gold project with about 41 million Canadian dollars in working capital. All other Alaskan assets as well as those in Nevada will go to the new company, Corvus Gold Inc., which will have about 3 million Canadian dollars in working capital.
In the base metal market, meanwhile, aluminum giant Russia's United Co. Rusal (486) said that it may increase production targets due to growing demand in Asia. Rusal's head of capital markets Oleg Mukhamedshin told reporters in Hong Kong that if the aluminum market improves further, "we can consider raising production" which is currently pegged at 4.1 million metric tons for this year.
Meanwhile, the Chilean government's proposal to increase mining tax may cost companies including BHP Billiton plc ( BHP ), Xstrata plc ( XTA ) and Anglo American plc ( AAUKY ) an additional $1.2 billion over the next two years. Chile is the world's largest copper producer and hiking its mining tax is viewed as one way to rebuild its financial footing following the February earthquake.
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