Gold surges to a new record high in USD-terms amid fresh concerns over debt-ridden countries. Comex gold futures rise to as high as 1254.5 as Fitch Ratings' warned that the UK's deficit challenge is 'formidable'. The pound slides and European equities lose grounds. Crude oil prices also reverse earlier gains.
While maintaining Britain's AAA rating with 'stable' outlook, Fitch said 'the scale of the UK's fiscal challenge is formidable and warrants a strong medium-term consolidation strategy, including a faster pace of deficit reduction than set out in the April 2010 budget'. The agency said while the UK's AAA rating is supported by its 'strong policy institutions, advanced, diversified and flexible economy, exceptional financing flexibility and historical track record of fiscal consolidation', the government needs to adopt 'a strong and credible medium-term adjustment plan' to store market confidence in fiscal sustainability. In fact, UK has fastest rise in public debt ratios since 2008 among the 'AAA' rated economies. Treasury estimated government debt-interest costs will reach 70B pound in 5 years, compared with 31B pound in the last fiscal year.
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