PRECIOUS-Gold surges to record, biggest daily gain since 09

By Frank Tang

NEW YORK (BestGrowthStock) – Gold prices surged 3 percent to an all-time high late in New York session on Thursday, the biggest one-day rise since early 2009, as the dollar slumped a day after the Federal Reserve unleashed a second round of monetary easing.

Silver rose 6 percent to its highest level since 1980, palladium was up 4 percent at a 9-1/2-year peak and platinum reached its strongest price since 2008.

“The dollar got hammered, and a lot of people are concerned that we are headed for the winds of inflation. It’s a perfect storm for gold today,” said Bill O’Neill, partner of New Jersey-based commodities firm LOGIC Advisors.

Investors now turn their attention to Friday, when the U.S. nonfarm payrolls report will show the state of the world’s largest economy, and the Bank of Japan will announce a rate decision, after its asset-buyback plan last month rocked global markets.

Spot gold rose 3.4 percent to a record of $1,393.16 an ounce. It later was up 3.3 percent at $1,391.39 an ounce at 4:19 p.m. EDT.

U.S. gold futures for December delivery settled up $45.50 at $1,383.10, with trading volume at about 250,000 lots, sharply above its 250-day moving average, preliminary Reuters data showed.

The Fed’s move, its second round of quantitative easing, stripped almost 1 percent off the value of the dollar against a basket of currencies (.DXY: ), triggering a broad-based precious metals rally.

The inverse link between gold and the dollar strengthened after the Fed announcement, Reuters data showed, with the hourly correlation between the two tightened to peak at a negative 0.66 on Thursday.

“The relationship between the dollar and gold remains a very strong one and the recent move post-QE is a dollar-related move more than anything else,” said RBS commodities strategist Daniel Major. “It’s pretty constructive on a near-term basis, provided the market continues to trade gold very closely to moves in the currency.”

The Federal Reserve committed $600 billion to buy government bonds late on Wednesday in a fresh effort to support a struggling U.S. economy, undermining the U.S. currency and stoking fears over longer-term inflation. Gold benefited as a hedge against a weaker dollar and inflation.

The dollar’s third successive fall brought its losses this week to 1.5 percent as the market concluded that the Fed’s move spelled more dollar supply that would be likely to weigh it down further.

Weakness in the greenback tends to benefit dollar-priced commodities as it cuts their cost for other currency holders, but it benefits gold in particular as the metal can be bought as an alternative asset to the currency.

“There is definitely going to be some more fallout from what has been announced,” said Credit Suisse analyst Tom Kendall. “Clearly this is contributing to the bearishness on the U.S. dollar, and that is bullish for all commodities, not just gold.”

Currency analysts are waiting to see what the broader implications of the Fed’s move will be in what is still a heavy news week on the macroeconomic front.


The U.S. dollar slumped on Thursday, hitting a 28-year low against the Australian currency and a more than nine-month trough against the euro, as a Federal Reserve decision to buy more Treasuries pushed U.S. yields lower and prompted investors to seek returns elsewhere.

The Fed’s commitment to open-ended purchases of Treasuries, implying low funding costs, brings into focus an expected increased use of the dollar in carry trades in which the U.S. dollar is used to fund purchases in commodities, emerging markets and higher-yielding currencies.

On the physical side of the gold market, Indian demand was strong because of the Hindu festivals of the Dhanteras, which celebrates prosperity, and the Diwali festival of light.

Silver rose to a 30-year high at $26.26 an ounce, tracking gains in gold. It was up 5.6 percent at $26.19 at last trade.

Palladium rallied to its strongest since May 2001, lifted by strength in gold and expectations its underlying fundamentals will improve as demand from automakers recovers and supply struggles to keep pace.

Palladium peaked at $679.50 an ounce and traded up 4.4 percent at $678.97 an ounce.

Platinum rose to a two-year high at $1,788.74 an ounce and it climbed 4.5 percent to $1,747.74 an ounce at last.

(Additional reporting by Amanda Cooper in London; Editing by Walter Bagley)

PRECIOUS-Gold surges to record, biggest daily gain since 09