US gold futures finished sharply higher for a second straight day on Wednesday on the back of a tumbling dollar, near-record crude oil prices and the speculation that the US Federal Reserve may cut key interest rates again. Volume was thin ahead of the US Thanksgiving holiday on Thursday.
"Oil and the dollar. No question. And the market now interprets that all the information is saying the Fed is going to cut rates. And lower rates mean cheap money," said Leonard Kaplan, president at Prospector Asset Management in Evanston, Illinois.
Most-active December gold on the Comex division of the New York Mercantile Exchange settled up $7.20 at $798.60 an ounce, trading between $795.00 and a high of $808.00 in the overnight sessions.
Oil declined but held above $97 a barrel on Wednesday, after closing in on the $100 milestone as the dollar hit new lows and cold weather in the United States, the world's biggest fuel consumer, stirred anxiety over winter supplies.
Gold is used as a hedge against oil-led inflation. The dollar hit a record low against the euro for the second straight day and fell to its lowest level against the yen, hurt by worries about the credit market losses and the health of the US economy.
A lower dollar makes gold, which is denominated in the US currency, cheaper for holders of other currencies. Gold is often seen as an alternative to holding the greenback. Jonathan Jossen, an independent Comex floor trader in New York, said on Wednesday's trading was very skittish and the December contract could potentially move sharply higher with a robust market.
UBS Investment Bank in London told clients in a note that it still favoured further downside in gold, but that the poor performance and outlook for the dollar clouded view.
"Any sign that over-the-counter investors are jumping back into gold could see the metal quickly back towards the highs," UBS said. Comex estimated final gold volume at 138,486 contracts, with gold options at 18,383 lots. Total turnover in Chicago Board of Trade electronic 100-oz gold futures was 25,211 lots at 3:01 pm.
Many market participants were away this holiday-shortened week due to the US Thanksgiving Day on Thursday and the London Bullion Market Association conference at Mumbai. On Thursday, floor trading of precious metals will be closed but Nymex/Comex products on CME Globex will be open for trading until 5:15 pm.
At 2:15 pm EST (1915 GMT), spot gold was quoted at $799.80/800.50 an ounce, compared with $793.90/794.70 in New York on Tuesday afternoon. London bullion dealers fixed the afternoon spot reference price at $798. Comex December silver closed up 8.0 cents at $14.420 an ounce, trading between $14.325 and $14.825.
Spot silver was quoted at $14.47/14.51 an ounce, compared with $14.61/14.66 late on Tuesday in New York. London silver was fixed at $14.55. Nymex January platinum ended down $2.50 at $1,467.20 an ounce. Spot platinum was quoted at $1,461/1,465. December palladium slipped $6.35 or 1.7 percent to finish at $357.95 an ounce. Spot palladium was at $354/358.