Gold surged over 3 per cent for its best day in eight months on Thursday as the Federal Reserve’s lack of commitment to raise interest rates and continued tensions in the Middle East unleashed a wave of short covering.
Bullion hit its highest level in more than two months. Silver jumped as much as 5 per cent, while platinum and palladium also climbed as new hurdles emerged to settling South Africa’s mining strike.
“The Fed statement and geopolitical tensions sparked a frantic reversal in market sentiment. Investors are now bullish instead of bearish on gold,” said Phillip Streible, senior commodities broker at Chicago-based RJ O’Brien.
Gold was higher during London hours as the US dollar eased after the Fed signalled on Wednesday it will stick with a near-zero interest rate policy to support the economy, disappointing traders who had bet on hints of policy tightening.
Gains accelerated shortly before midday in New York, after prices pierced above $US1,305 an ounce, triggering heavy stop-loss orders for traders who had previously expected lower bullion prices on hopes of a better US economy.
Lower US 2014 growth forecast by the Fed and lingering geopolitical tensions in Iraq and Ukraine rekindled investors’ interest in gold, traders said.
Spot gold was up 3 per cent at $US1,315.90 an ounce by 3:52 p.m. EDT (1952 GMT), having earlier hit $US1,321.70, a two-month high.
Technical buying also helped lift prices on Thursday as the rally sent gold above tough resistance at $US1,285, near a key Fibonacci retracement as well as its 50- and 100-day moving averages, analysts said.
US COMEX gold futures for August delivery settled up $US41.40 at $US1,314.10 an ounce.
Silver gained 4.1 per cent to $US20.68 an ounce, having earlier hit $US20.91, a three-month high. It notched its biggest one-day gain in four months.
Platinum rose 1.6 per cent to $US1,467.70 an ounce and palladium was up by 1.5 per cent to $US835.05 an ounce. Both were trading near one-week highs as a mining strike in major producer South Africa looked set to drag on.
South African platinum union AMCU has made “unaffordable” new demands beyond a deal struck with producers last week, mining companies said on Wednesday, dashing hopes of an end to the country’s longest and costliest mining strike.