Gold ends 3.7% higher as funds buy, oil soars

Gold was at $912.60/913.60 by New York’s last quote at 2:15 p.m. EDT, up from $879.60/880.60 an ounce late in New York on Wednesday. Earlier in the session it touched $916.40, its highest level since May 27. Zachary Oxman, senior trader of Wisdom Financial in Newport, California, cited institutional investors rotating funds back into commodities due to weaker equities. “It’s a repatriation into the commodity trade, mostly out of the stock markets. Commodities is still one safe place so far this year, as stocks have been volatile and tough to make money,” Oxman said.

The US gold contract for August delivery on the COMEX division of the New York Mercantile Exchange settled up $32.80, or 3.7%, at $915.10 an ounce. It was the biggest one-day absolute gain for a COMEX gold contract on a front-month delivery basis since March 1985.

US stocks sank 2.5% in late trade as recession worries were increased by fears of oil prices rocketing higher. In addition, the dollar extended losses against major currencies as expectations for a US rate hike receded after comments from the Federal Reserve on Wednesday.

The combination of a weak dollar and a slide in the equity markets on concerns over the health of the automotive sector “has been critical for gold,” Merrill Lynch analyst Daniel Hynes said. “This has set gold off again after it had been stuck in a trend for a while now,” he said. Platinum and silver tracked gold higher, rising 3% and nearly 5% respectively.

The US Federal Reserve dampened hopes for a rate hike, saying inflation, while still a worry, was likely to temper later in the year. “The Fed wasn’t as hawkish as the market expected, hence the dollar is under pressure,” said JP Morgan analyst Michael Jansen. “People are starting to worry that the Fed might be slightly behind the inflation story.”

Goldman Sachs & Co strategists urged stock investors to ‘underweight’ US financial and consumer shares, admitting it was wrong when it upgraded both sectors just seven weeks ago.

Oil, the other main external driver of the gold price, surged 4% to a record $140.39 a barrel. In industry news, Gold Fields Limited said it has shut down a shaft of its Kloof Gold Mine in South Africa after two employees were killed early on Thursday following an earth tremor. The company said it has lost 20 kilograms of gold from the closure.

Meanwhile, spot platinum rose in line with gold, climbing more than 3% to a session high of $2,078.00. It was last at $2,055.00/2,075.00 an ounce against $2,004.50/2,024.50 late in New York on Wednesday. Silver also tracked gold, rising nearly 5% to a session high of $17.36. It was last at $17.13/17.21 an ounce from its Wednesday US finish of $16.56/16.62 an ounce. Spot palladium also ended higher at $464.50/472.50 an ounce from $460.00/468.00 an ounce late in the US market on Wednesday. (Reuters)