Gold hit its highest since late March on Tuesday as bets that record-low interest rates will persist buoyed stocks and on fresh signs of interest from investors in futures and bullion-backed funds. Platinum prices hit ten-month highs. Spot gold hit a three-month high at $1,332.10 an ounce and was at $1,327.90 by 1411 GMT. US gold futures for August delivery were up $5.30 an ounce at $1,327.30.
Expectations that interest rates will remain at record lows for some time yet and upbeat Chinese data lifted US, European and Asian stocks on Tuesday, traders said. Low interest rates tend to favour non-yielding bullion. "Lower interest rates are for sure a supportive factor for gold, and if that idea spreads in the market, it might trigger investor invest there as well," Heraeus trader Alexander Zumpfe said. "(I) could imagine that ETF buying we already saw over the last couple of days is (also) delivering some support."
The world's largest gold exchange-traded fund, New York's SPDR Gold Shares, reported a 5.7 tonne inflow on Monday, the biggest one-day change it has reported in its holdings since March 10. Monday's surge has taken the fund's holdings to the highest since late April at 790.7 tonnes, after they fell to their lowest since late 2008 in May at 776.9 tonnes. "Gold's strength over the past 24 hours could partly be explained by chunky ETF buying yesterday," Swiss bank UBS said in a note on Tuesday.
In addition, data from the Commodity Futures Trading Commission showed on Friday that hedge funds and money managers increased their bullish bets in gold futures and options to their highest since March after last week's strong rally in bullion prices. Russian President Vladimir Putin said on Tuesday he and European Union states had tried unsuccessfully to persuade Kiev to extend a cease-fire in east Ukraine, and the Ukrainian president had veered off the road to peace.
"If we can hold $1,321 today and close above $1,331 I think it could open the road towards a test of $1,370," Saxo Bank's head of commodities research Ole Hansen said. In the physical markets, however, buyers were put off by the recent price increase. In top consumer China, local prices fell to a discount of about $1 an ounce to global prices on Tuesday from being on par in the previous session, in a sign of weak demand.
South Africa's Anglo American Platinum said on Monday it was reviewing options for its Rustenburg operations, which were hit by the strike. Spot platinum hit its highest since September at $1,501 an ounce and was up 1.2 percent at $1,499.99 an ounce in afternoon business. Spot palladium was up 1.4 percent at $852.10 an ounce. Silver was up 0.3 percent at $21.03 an ounce.
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