Gold rose 1 percent to 6-1/2-week highs on Thursday as stock markets, commodities and the euro all rallied after the Federal Reserve said it planned to keep interest rates at rock bottom for some years and hinted at further economic stimulus. The gain extends the metal's biggest one-day rise in three months on Wednesday after the Fed said it might consider further monetary easing through bond purchases and pushed back the likely timing of an eventual interest rate hike to late 2014.
The news cheered gold investors, who have long seen a US rate hike, which would lift both the dollar and the opportunity cost of holding non-interest bearing bullion, as the likely point at which the precious metal's rally would peter out. "At the moment everything points to even higher prices, given the strong risk appetite, the better mood among market players, the strong equity markets and the weak dollar," said Commerzbank analyst Daniel Briesemann.
Spot gold was up 1 percent at $1,727.01 an ounce at 1451 GMT, while US gold futures for February delivery were up $27.30 an ounce at $1,727.40. Earlier spot prices hit a peak of $1,729.50 an ounce, their highest since December 8. The euro hit a fresh session high against the dollar on Thursday, marking a five-week high, after data also pointed to some signs of a strengthening US job market.
"The strong rally in gold changed what prior to the announcement had been a test of gold's resolve," said Saxo Bank senior manager Ole Hansen. "The Fed statement changed all that, and from thinking that the gold rally potentially only had one year left to run, it could now continue for longer." A poll of precious metals price forecasters carried out by Reuters in January showed most expect gold to continue its bull run for a 12th year in 2012 as interest rates stay low and central banks continue buying. The survey of 45 analysts predicted an average spot gold price of $1,765 an ounce in 2012, 14 percent higher than last year's average of $1,544. However, the rate of its rise is likely to slow, they said.
"Coupled with continued central bank appetite for gold, the broader macro backdrop remains conducive for gold price gains, given negative real interest rates, concerns over longer-term inflationary pressures and uncertainty surrounding the financial markets and economic outlook," Barclays Capital analyst Suki Cooper said. Physical gold trade was muted by the closure of markets in China and other key Asian gold-buying centres for the Lunar New Year holiday. Silver was up 1.1 percent at $33.57 an ounce, having tracked gains in gold up to its highest in nearly eight weeks at $33.78 an ounce. Spot platinum was up 2.4 percent at $1,616.24 an ounce, while spot palladium was up 0.8 percent at $696.47 an ounce.
Miner Lonmin, the world's third-largest platinum producer, posted a rise in first-quarter output despite the impact of safety stoppages, which it warned could hit both sales and costs if current trends persist. Anglo American, whose Anglo American Platinum unit is the world's biggest miner of the white metal, said its stoppages were more than double those of the fourth quarter of 2010. Refined platinum production was 9 percent lower.
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