Gold was set for its biggest one-day rally in two months on Thursday as a fresh set of weak economic data further eroded confidence in the global economy, prompting a surge of interest in perceived safe-haven assets. Wall Street stocks came under pressure after a surprise rise in US weekly jobless claims took the number of people seeking unemployment benefit near six month highs, while the euro was undermined by fresh concern about its weaker member economies.
Gold was bid at $1,212.60 an ounce by 1415 GMT, against $1,197.00 late in New York on Wednesday, still nearly 5 percent below late June's lifetime high around $1,264. Gold for December delivery on COMEX was up $15.8 at $1,215.00 an ounce. "It's a combination of a macro environment being favourable to gold (and) actually physical demand has improved as well so we would expect prices to gain some momentum," said Barclays Capital strategist Suki Cooper, adding her team expected gold to average $1,260 an ounce in the final three months of this year.
The gold price is around its highest in four weeks, helped also by the Federal Reserve's signal on Wednesday that it will buy government bonds to stimulate a flagging economy and keep interest rates low for an extended period of time. Traders in London earlier pointed to a research note from Goldman Sachs, which upgraded its forecast for the gold price, as a driver to the rally in the price on Thursday.
"The recent sell-off has left speculative long positions in gold oversold relative to US real interest rates, which we believe has set the stage for a rally to our six-month gold price target of $1,300/oz," the bank said. Although demand from key Asian consumers has been suppressed by the rise in gold prices over the last week or so, the desire for a safe haven as financial market volatility increases has translated into a rise in investment demand.
The world's largest gold-backed exchange-traded fund, SPDR Gold Trust, said its holdings rose for the first time in a week. Silver benefited from a safe-haven bid, rising to $18.04 an ounce from $17.84 the day before. Asian traders said earlier the drop in PGM prices was a knee-jerk reaction to declines in equity markets. Spot platinum was last at $1,524.80 an ounce, down around 2.2 percent from levels seen late in New York on Wednesday, but up from an intraday low of $1,500.75, while palladium was at $470.00 versus $477.00.