Gold jumped two percent on Friday as global financial markets gained ground after the US Federal Reserve cut one of its interest rates to improve credit conditions. Spot gold rose to the day's peak of $663.50 an ounce after the Fed's move and was trading at $658.00/658.80 a troy by 1410 GMT, up sharply from $650.50/651.10 late in New York on Thursday.
When it fell as far as $641.10 - the lowest since June 28. "This has caused people to cover short positions which were probably initiated yesterday and we are seeing all asset prices rising on the back of this move," metals analyst John Reade at UBS said.
The US Federal Reserve cut the discount rate governing direct Fed loans to banks by a half-percentage point in a surprise move. The bank said financial market conditions had deteriorated and tighter credit conditions and increased uncertainty had the potential to restrain economic growth. European stocks surged back from losses while Wall Street shot up at the opening on the back of Fed's move.
"A stabilisation of equity markets would take some pressure from gold," Dresdner Kleinwort said in a note."This move has helped markets stabilise and recover but I certainly do not think it means that the whole period of volatility is over," Reade said.
Gold has in recent months shed its traditional role as a safe-haven because of its role in diversified portfolios of large investors, who see it as just another asset to be bought and sold. The dollar fell against the euro, further bolstering gold and oil prices jumped $1 a barrel after the Fed's move, with US crude up 96 cents at $71.96 a barrel.
A higher US currency makes dollar-denominated metals more expensive for holders in other currencies, while gold is also used as a hedge against inflation, often triggered by oil. Traders said price dips could attract physical buying while another plus has been the rising investment in listed exchange traded gold funds in recent weeks.
New York-listed StreetTRAC-KS Gold Shares, the world's largest gold-backed ETF, now holds about 510 tonnes of gold, nearly double the number at the start of the year. Platinum rose to $1,235/1,242 an ounce from $1,225/1,232 on Thursday when it fell as low as $1,218.20 - the lowest since March 19. Palladium was softer at $330.75/334.75 an ounce from $331.45/335.45 and silver was higher at $11.86/11.89 an ounce from $11.75/11.80 late in New York.
Comments
Comments are closed.