Gold rose on Wednesday as the dollar dipped after Singapore effectively revalued its currency, and as upbeat US corporate earnings boosted appetite for currencies seen as higher risk. The Singapore move was viewed as a mark of confidence in the economic recovery.
Other precious metals also rose, with palladium hitting a new two-year high at $548.50 an ounce as investors bet supply would fail to keep pace with a demand recovery this year. Spot gold was bid at $1,153.15 an ounce at 1425 GMT, against $1,150.15 late in New York on Tuesday. US gold futures for June delivery on the COMEX division of the New York Mercantile Exchange rose 20 cents to $1,153.60 an ounce.
The dollar's fall boosted interest in gold as an alternative asset, and made it cheaper for other currency holders. The unit fell after Singapore tightened monetary policy, and on positive corporate earnings, including those of J.P. Morgan Chase which increased investor appetite for riskier assets.
"Gold has been heavily driven by the currencies," said Daniel Major, an analyst at RBS Global Banking & Markets. The metal's rise to four-month highs at the beginning of the week on the back of the euro's recovery against the dollar has also shored up the technical picture for gold, analysts said.
"Gold has achieved the level it has achieved based on fundamentals, and now the technical picture is looking good," said Peter Hillyard, head of metals sales at ANZ Bank. "The $1,140-1,145 level is clearly showing itself as good support." In an interview ahead of the launch of the metals consultancy's annual report, GFMS chairman Philip Klapwijk said gold is near the final phase of its 10-year bull run, but prices could still reach $1,300 an ounce in 2010. Gold investment demand in 2009 surpassed jewellery buying for the first time since 1980 as investors flocked to the metal as a safe store of value as the global recession bit, GFMS said.
Indicators of physical gold demand were positive, with the president of the Bombay Bullion Association saying March imports to major bullion consumer India jumped to 27.7 tons from 4.8 tons a year before. Holdings of the world's largest gold-backed exchange-traded fund, New York's SPDR Gold Trust, were unchanged at record highs on Tuesday.
Among other precious metals, palladium hit another two-year high on Wednesday. "(The) improving economic outlook and strong growth in auto sales in Asian markets support demand for palladium," said Fairfax investment bank in a note. "Around 54 percent of metal production is used in autocatalyst production."
Palladium was at $538.50 an ounce against $526, while platinum was at $1,720.50 an ounce against $1,714. Silver was bid at $18.33 an ounce against $18.18. Prices of minor precious metals also rose on Wednesday, with rhodium hitting its highest since October 2008 at $2,875 an ounce, ruthenium its highest since December 2008 at $190 an ounce, and iridium a 12-year high at $520 an ounce. Traders said a mixture of firmer industrial demand and some speculation was behind the rise in the metals.
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