Tags: gold | china | stimulus | euro

Gold Jumps 1.5% on China Stimulus Talk, Euro Fears

Thursday, 27 Sep 2012 03:42 PM

Gold rose 1.5 percent on Thursday, its biggest daily gain in two weeks, on hopes for additional monetary stimulus from China and fresh austerity steps in Spain, which renewed fears about the eurozone.

Bullion extended early gains after Spain announced a detailed timetable for economic reforms and a tough 2013 budget based mostly on spending cuts in what many see as an effort to pre-empt the likely conditions of an international bailout.

Gold priced in euro terms surged over 1 percent to a record, underscoring the metal's traditional safe-haven appeal especially among Europeans in times of economic uncertainty.

"Gold buyers are responding to stimulus possibilities," said George Gero, vice president of RBC Capital Markets.

Lingering economic weakness in the euro zone highlighted by Spain's new austere budget, and slow growth in China and United States provided reasons for the central banks to take more actions to boost growth, Gero said.

Spot gold rose 1.4 percent to $1,776.34 an ounce by 2:59 p.m. EDT (1859 GMT), snapping three consecutive days of losses. Gold is within striking distance of this year's high at $1,790.30, set on Feb. 29.

U.S. gold futures for December delivery settled up $26.90 an ounce at $1,780.50, with volume about 10 percent above its 30-day average, preliminary Reuters data showed.

There was active buying of bull call spreads and other bullish option plays as some investors bet gold could rise sharply by the year-end, said independent COMEX gold option floor trader Jonathan Jossen.

 

EUROPE, CHINA IN FOCUS

The outlook for Europe's economy darkened with euro zone business confidence falling to a three-year low and a range of economic indicators across the continent pointing toward recession. Meanwhile, U.S. data also pointed to a sharp slowdown in manufacturing activity.

"There is speculation that China will engage in additional stimulus measures," said Bill O'Neill, partner at commodity investment firm LOGIC Advisors.

The metal gained further after news that China's central bank had injected a record amount of cash this week, fuelling talk that China may take steps to boost the country's weak stock market, sparking a global equities rally.

Gold is on track to end September with its largest quarterly gain in more than two years, of 11 percent, after the U.S. Federal Reserve unveiled a third round of bullion-friendly monetary stimulus this month.

Silver rallied 2 percent to $34.61 an ounce.

Among platinum group metals, platinum traded up 1 percent at $1,644.70 an ounce, and spot palladium added 0.8 percent at $630.30 an ounce.

Platinum prices are set to end the quarter up around 13 percent, while palladium is heading for an 8 percent gain. Platinum group metal prices have been lifted by unrest in South Africa's mining sector, where violence at a mine operated by No.3 producer Lonmin killed 45 people.

© 2017 Thomson/Reuters. All rights reserved.

   
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Gold rose 1.5 percent on Thursday, its biggest daily gain in two weeks, on hopes for additional monetary stimulus from China and fresh austerity steps in Spain, which renewed fears about the eurozone.
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2012-42-27
Thursday, 27 Sep 2012 03:42 PM
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