Safe-haven gold rally continues after rate cuts
NEW YORK/LONDON (Reuters) - Gold rose to a nine-day high on Wednesday, extending a safe-haven rally after coordinated interest rate cuts by major central banks failed to restore confidence to battered financial markets.
U.S. gold futures rose 2.8 percent, and silver jumped 3.4 percent as investors continued to flee the stock market and park their money in hard assets.
"Gold truly is the commodity, and silver by its parasitic role, they are truly the flight-to-safety vehicles. With the dollar losing some ground, that lent a little bit of support as well," said Bill O'Neill, a partner at LOGIC Advisors.
The Dow Jones industrial stock average ended down 189 points. It had spent some of the day in positive territory after a series of scary slides reflecting pessimism about whether global credit system bailouts will prevent economic disaster.
Central banks around the world cut interest rates in unison in a joint response to the world's worst financial crisis in nearly 80 years.
December gold reached $924.90, its highest since September 29. It settled $24.50 higher at $906.50 an ounce on the COMEX division of the New York Mercantile Exchange.
Spot gold rallied to $920 an ounce, its highest since September 29 and was last quoted at $913.80 an ounce, up 3.1 percent from $886.60 at Tuesday's New York close.
"Gold will still continue to gain safe-haven interest," said Simon Weeks, director of precious metals at Bank of Nova Scotia.
"I do not think the cuts will solve the situation. It will help smooth the situation, but I don't think there are any miracle cures at the moment," he said.
The metal touched multiyear highs in several other currencies. In South African rand, it touched its highest price recorded on Reuters data, which goes back to 1990. In Australian dollars, it was at the highest since 1985.
Spot gold has risen 25 percent since mid-September as a deepening financial crisis, spreading to banks in Europe from the United States, prompted investors to sell investments in equities markets and seek refuge in safer assets.
But it remained well below its lifetime high of $1,030.80 an ounce struck in March of this year.
Physical demand for gold also has shot up, analysts say, as consumers invested in gold coins amid news of banks being taken over by governments or sold to rivals.
The U.S. Mint said on Tuesday that because of the extreme fluctuating market conditions for 2008, as well as current market conditions, gold and silver demand is "unprecedented."
Holdings in the world's largest gold-backed ETF, the SPDR Gold Trust, rose to 745.22 tons as of October 8 from 744.54 per ton as of October 7.
December silver jumped 43.0 cents to $11.81 an ounce. Spot silver went out at $11.74 an ounce, versus the close at $11.51 an ounce on Tuesday.
Spot palladium closed unchanged.
Platinum fell, ending the day near $990.50 an ounce, down from $1,004.00 amid heavy selling on fears of falling demand for autocatalysts. It tumbled to $920 an ounce on Monday, its lowest level since November 2005, on the back of poor car sales, especially in the United States.
(Editing by Peter Blackburn; Editing by David Gregorio)
