Tags: gold | price | metal | inflation

Gold Hits 11-Month High After ECB Vow, With $1,800 in Sight

Thursday, 04 Oct 2012 12:46 PM

Gold shot up nearly 1 percent on Thursday to its highest price in 11 months, with the market's sights set firmly on $1,800 an ounce, as bullion's inflation-hedge appeal was boosted by signs the European Central Bank intends to keep borrowing costs low.

Platinum group metals rallied as labor unrest in South Africa's platinum mines showed little sign of abating, which could reduce output. South Africa holds around 80 percent of the world's platinum reserves.

Commodities and equities broadly rose while the dollar fell against the euro after ECB President Mario Draghi said everything was in place for the bank to buy the bonds of troubled eurozone countries such as Spain and that conditions linked to such buys need not be punitive. The ECB also kept its main refinancing rate steady at 0.75 percent, a record low, to stimulate economic growth.

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"Draghi’s going to make sure that the market doesn’t fall apart. For gold, that’s a positive because the move is reducing the risk of something really bad happening" with the use of economic stimulus to keep bond yields low, said Axel Merk, chief investment officer of Merk Funds with $600 million in assets.

Some analysts were surprised by gold's rally ahead of Friday's all-important September U.S. nonfarm payrolls data. The report is keenly watched for clues on how long the U.S. central bank will continue adding $40 billion a month to the system through purchases of mortgage-backed securities.

Spot gold rose 0.8 percent to $1,791.14 an ounce, having earlier hit a high of $1,794.40, the loftiest level since mid-November 2011.

U.S. COMEX December gold futures gained $16.70, or 0.9 percent, to $1,796.50 an ounce, with trading volume near its average, preliminary Reuters data showed.

Spot silver rose 0.9 percent to $34.88 an ounce.

Gold was also underpinned by data showing the number of Americans filing new claims for unemployment benefits rose only slightly last week, suggesting a mild improvement in the labor market.

CAUTION ON PAYROLLS

Despite Thursday's rally, some traders may stay out of the market ahead of the U.S. employment report on Friday.

Data on Wednesday showed a surprising jump in private employment in the world's largest economy. But analysts said it was not enough to alter the view that the Federal Reserve will keep interest rates low until it sees signs of substantial economic progress.

Investor interest in gold remained buoyed. Holdings of gold-backed exchange-traded funds inched up to 74.2 million ounces as of Oct. 2, just off a record high of 74.288 million ounces in late September.

Spot platinum was up 1.6 percent at $1,707.49 in an eighth straight session of gains, supported by a report that South African police fired tear gas at striking miners near the Rustenburg operations of the world's top platinum producer, Anglo American Platinum.

Palladium climbed 2.9 percent to $667.47 an ounce on platinum's coattails.

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© 2017 Thomson/Reuters. All rights reserved.

 
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Gold shot up nearly 1 percent on Thursday to its highest price in 11 months, with the market's sights set firmly on $1,800 an ounce, as bullion's inflation-hedge appeal was boosted by signs the European Central Bank intends to keep borrowing costs low.
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2012-46-04
Thursday, 04 Oct 2012 12:46 PM
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