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PR Newswire
02-12-2014, 07:28 AM
Gold jumps price 3.6 per cent to one-month high
DOW JONES DECEMBER 02, 2014 8:00AM
GOLD prices surged to a one-month high overnight as a rush of safe-haven buying sparked by Japan’s credit rating downgrade forced bearish investors to clamour for the exit.
Gold for February delivery, the most actively traded contract, rose $US42.60, or 3.6 per cent, to settle at $US1218.10 an ounce on the Comex division of the New York Mercantile Exchange. This was the highest settlement since October 29, when futures closed at $US1224.90 an ounce.
Moody’s Investors Service cut Japan’s government debt rating by one notch yesterday, sparking a rally in gold during electronic trading overnight. The credit ratings firm flagged delays to planned tax increases as fuelling uncertainty over Japan’s ability to reduce its fiscal deficit.
“Any sort of major downgrade raises questions about credit quality, and we’re having a rush back into basics,” George Gero, a senior vice president with RBC Capital Markets Global Futures, said.
Gold is viewed by some investors as a safe place to stash their wealth on the belief that the precious metal will retain more of its value than cash or paper assets like stocks and bonds during periods of instability.
A tumultuous day in the currency markets, which saw the yen and the US dollar pull lower, also lent support to gold prices. As the US dollar eases, dollar-denominated gold becomes less expensive for buyers using other currencies.
“The dollar being off and Japan being downgraded together is helping push the gold prices back up,” Thomas Capalbo, a broker with Newedge in New York, said.
Gold’s gains accelerated as prices broke above $US1190 an ounce, triggering automatic buying orders, brokers said. Bearish traders who wagered on further losses in gold often put automatic buying orders to limit potential losses if the market moves higher.
The flurry of purchases helped gold and silver futures post their biggest one-day gain since September 19, 2013. Silver for March delivery ended 7.3 per cent, or $1.136, higher at $US16.692 a troy ounce.
While gold prices have been stabilising in recent weeks, the number of open contracts has dropped 21 per cent between November 20 and Friday. This is a sign that bearish investors are leaving the market, rather than new buyers flocking to gold, analysts said.
Still, investors won’t know for sure what drove gold prices higher until Monday’s open-interest figures are published on Tuesday, according to James Cordier, a principal with Liberty Trading Group.
“All eyes will be on whether these are new longs or previously covered positions,” he said.
The outlook for gold has brightened as a result of Monday’s move higher, Mr Cordier said.
The global economy stands on a firmer footing than it has in years, and with central banks likely to be slow to raise interest rates in 2015, it sets the stage for gold prices to rally, he said.
Platinum futures tracked gold higher, ending near a one-month high. Platinum for January delivery rose 2.5 per cent to $US1,241.60 an ounce, the highest since November 3.
DOW JONES DECEMBER 02, 2014 8:00AM
GOLD prices surged to a one-month high overnight as a rush of safe-haven buying sparked by Japan’s credit rating downgrade forced bearish investors to clamour for the exit.
Gold for February delivery, the most actively traded contract, rose $US42.60, or 3.6 per cent, to settle at $US1218.10 an ounce on the Comex division of the New York Mercantile Exchange. This was the highest settlement since October 29, when futures closed at $US1224.90 an ounce.
Moody’s Investors Service cut Japan’s government debt rating by one notch yesterday, sparking a rally in gold during electronic trading overnight. The credit ratings firm flagged delays to planned tax increases as fuelling uncertainty over Japan’s ability to reduce its fiscal deficit.
“Any sort of major downgrade raises questions about credit quality, and we’re having a rush back into basics,” George Gero, a senior vice president with RBC Capital Markets Global Futures, said.
Gold is viewed by some investors as a safe place to stash their wealth on the belief that the precious metal will retain more of its value than cash or paper assets like stocks and bonds during periods of instability.
A tumultuous day in the currency markets, which saw the yen and the US dollar pull lower, also lent support to gold prices. As the US dollar eases, dollar-denominated gold becomes less expensive for buyers using other currencies.
“The dollar being off and Japan being downgraded together is helping push the gold prices back up,” Thomas Capalbo, a broker with Newedge in New York, said.
Gold’s gains accelerated as prices broke above $US1190 an ounce, triggering automatic buying orders, brokers said. Bearish traders who wagered on further losses in gold often put automatic buying orders to limit potential losses if the market moves higher.
The flurry of purchases helped gold and silver futures post their biggest one-day gain since September 19, 2013. Silver for March delivery ended 7.3 per cent, or $1.136, higher at $US16.692 a troy ounce.
While gold prices have been stabilising in recent weeks, the number of open contracts has dropped 21 per cent between November 20 and Friday. This is a sign that bearish investors are leaving the market, rather than new buyers flocking to gold, analysts said.
Still, investors won’t know for sure what drove gold prices higher until Monday’s open-interest figures are published on Tuesday, according to James Cordier, a principal with Liberty Trading Group.
“All eyes will be on whether these are new longs or previously covered positions,” he said.
The outlook for gold has brightened as a result of Monday’s move higher, Mr Cordier said.
The global economy stands on a firmer footing than it has in years, and with central banks likely to be slow to raise interest rates in 2015, it sets the stage for gold prices to rally, he said.
Platinum futures tracked gold higher, ending near a one-month high. Platinum for January delivery rose 2.5 per cent to $US1,241.60 an ounce, the highest since November 3.