Gold up 1% on inflation expectations after central banks’ stimulus measures
LONDON — Gold prices rose 1% on Friday to six-and-a-half-month highs as expectations that central bank measures to stimulate growth would boost liquidity, fuel inflation and keep a lid on interest rates put the metal on track for a fifth straight week of gains.
A firmer tone across the financial markets also supported bullion. European shares and the euro rose, while oil rebounded from a one-and-a-half-month low, as investors moved back into markets still feeling the benefits of central bank support measures.
Spot gold hit a peak of $1,787.20 an ounce and was up 0.8% at $1,771.14 an ounce at 1344 GMT, while US gold futures for December delivery were up $14.00 an ounce at $1,784.20.
Disruption in the South African mining industry, which earlier this month helped drive platinum prices to levels not seen since late February, showed signs of spreading on Friday.
Workers have embarked on an illegal strike at a mine run by world number three bullion producer AngloGold Ashanti, a company spokesman said on Friday. He said the mine had 5,000 workers and that strikers had not yet communicated their demands.
The disruption comes a day after thousands reported back for work at platinum producer Lonmin after a wage hike deal was reached to end six weeks of industrial action and protest in which 46 people died.
"Headlines out of South Africa continue to capture the market’s attention despite the agreement reached at Lonmin this week," UBS said in a note. "On the one hand, the end of the nearly six-week-old strike is a positive development as operations can now begin to normalise.
"But on the other hand, the company is now deemed to have set a precedent, with the workers’ successful call for wage increases likely to fuel discontent elsewhere," it added. "This puts pressure on other producers to face the same calls and so places further supply risks for platinum over the weeks ahead."
Spot platinum was up 1.2% at $1,639.99 an ounce. Palladium was up 1.5% at $670.25 an ounce, while silver was up 1.4% at $35.04 an ounce.
The Bank of Japan was the latest central bank to unveil easing measures this week, after the Federal Reserve announced an aggressive asset purchasing programme earlier this month and the European Central Bank unveiled plans to buy bonds of the bloc’s heavily indebted countries.
The Fed move, a third round of quantitative easing which will see it buy $40bn a month in mortgage-backed debt until the outlook for the labour market improves, lifted spot gold by 2% in a single day.
"QE3 was a bit of a game-changer for a lot of people. People are having to think seriously about where they put their money," Ross Norman, CE of bullion broker Sharps Pixley, said.
"Gold does seem to have taken on a life of its own now. We think we might see $1,800 in the next couple of weeks or so."
The Fed measures have boosted interest in gold exchange-traded funds, popular investment vehicles that issue securities backed by physical metal.
Holdings of ETFs tracked by Reuters, which include the SPDR Gold Trust and products operated by London’s ETF Securities and Zurich Cantonalbank, are up 272,302 ounces so far this week, though they are below record highs.
"With the open-ended scheme to print as much dollars as needed until the US economy recovers, gold’s uptrend has fewer barricades on the way at least to earlier highs," Richcomm Global Services senior analyst Pradeep Unni said.
"Charts hint at a major resistance at $1,787-$1,790, where we have failed thrice earlier," he added. "Thus, consecutive closing above $1,790 will be a necessity to avoid a correction."
Data from Chinese customs officials showed silver imports fell 3.4% on the year to 304,216 kg in August, while the year-to-August number dropped 25%.
Palladium imports fell 31.53% on the year, but platinum imports jumped 43%.
More in this section
- Global stocks, bond prices fall after Fed decision
- US Federal Reserve to keep buying bonds at $85bn monthly pace
- JSE ends in red as markets await Bernanke speech
- Rand gains on good data
- JSE weakens despite upbeat CPI, current account data
- Better than expected news on inflation, current account boosts rand