Gold jumped 4 percent on Friday as jittery investors rushed to buy bullion, seeking a safe asset as uncertainty over a proposed $700-billion US bailout rescue plan mounted. Technical buying further buoyed bullion's rally while the dollar offered some support as it trimmed gains versus the euro.
Platinum tumbled almost 4 percent, dragged down by poor demand outlook. Spot gold was up at $894.40/896.00 per ounce by 1500 GMT, a rise of $18.7, compared with the previous nominal close of $875.70. Earlier, it fell as low as $866.20 an ounce.
Pressure mounted on lawmakers to agree on the salvage plan for the troubled US financial system after talks at the White House broke down in acrimony. European shares lost ground and US markets opened lower due to uncertainty. President George W. Bush said that while there were disagreements on parts of the bailout plan, legislation would be passed by Congress.
"The main driver right now is the dollar, but also risk aversion," said analyst Barbara Lambrecht at Commerzbank in Germany. The euro climbed to around 1.4648 against the dollar, after trading around $1.4580 earlier in the session. The dollar also fell 1 percent against the Japanese yen.
"We're waiting for the rescue package. There is uncertainty about when it is coming," she said. "The chances of further bad news, new financial crisis breaking out are all supportive for gold." Fortis on Friday denied it had liquidity problems, saying it had a funding base of 300 billion euros and solid solvency ratios as its shares fell for a fifth straight day in feverish trading.
Gold has gained about 20 percent since September 11 as safe-haven demand heightened after the collapse in the share price of Lehman Brothers raised questions about the stability of the US and global financial sector.
"Everything's just marking time, " said Simon Weeks, managing director of precious metals at the Bank of Nova Scotia. "People are waiting to see whether the US lawmakers will reach any conclusions," he said. Platinum dropped 3.6 percent, dragged down by weak demand prospects after Thursday's data showed that global output at Toyota - the largest automaker in Japan - declined by 17 percent in August.
The metal, widely used as a component in automotive catalytic converters, fell as low as $1,127.50 an ounce and was last at $1,133/1,153 an ounce, down from the nominal close on Thursday of $1,172.50. Spot silver was at $13.32/13.40 versus the nominal close of $13.16, while spot palladium was at $233/$241 versus the nominal close of $234.