Gold climbs above $1,200 in Europe

22 Nov, 2014

Gold climbed above $1,200 an ounce on Friday to hit its highest in three weeks after a surprise rate cut by China fuelled expectations demand could rise in the world's biggest consumer of the metal. China cut its benchmark interest rates for the first time in more than two years to lower borrowing costs and lift a cooling economy. "Any measures that accelerate the spending power of the Chinese public are bound to be positive for gold," Mitsubishi analyst Jonathan Butler said.
"(This could mean) additional spending power for Chinese consumers to buy jewellery and investment products." Spot gold was up 0.9 percent at $1,203.84 an ounce at 1501 GMT, while US gold futures for December delivery were up $12.80 an ounce at $1,203.70. Earlier spot gold touched its highest in three weeks at $1,207.70. Buying accelerated as the metal broke through key chart resistance at $1,200 an ounce, traders said.
A sharp drop in the euro versus the dollar earlier pressured gold to a session low of $1,186.84 an ounce, after European Central Bank chief Mario Draghi said inflation expectations were declining to very low levels, keeping the door open for further monetary easing soon. Gold is priced in dollars and tends to fall when the US currency strengthens. A rally in the dollar index earlier this month knocked gold to a 4-1/2 year low at $1,131.85.
"Overall the dollar continues to be leading the way. Therefore I have to say that, despite the demand for physical, because of the weakness in the euro, we have a chance of testing the lows again," MKS head of trading Afshin Nabavi said. Traders were also digesting news of central bank sales and purchases. Ukraine cut its gold reserves by more than a third in October, data from the International Monetary Fund showed, while Russia raised its gold holdings for a seventh straight month. Among other precious metals, silver was up 1.5 percent at $16.45 an ounce, while spot platinum was up 1.5 percent at $1,227.50 an ounce and spot palladium was up 2.3 percent at $785.98 an ounce.

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