January 15, 2015 / 11:41 AM / 3 years ago

PRECIOUS-Gold jumps 3 percent to 4-month high after SNB move

3 Min Read

(Updates prices, adds comment)

By Marcy Nicholson and Clara Denina

NEW YORK/LONDON, Jan 15 (Reuters) - Gold rose as much as 3 percent to a four-month high on Thursday after Switzerland's central bank unexpectedly abandoned its three-year cap on the franc sent global shares and bond yields into turmoil.

"Currency chaos is really the phrase of the day," said Bill O'Neill, co-founder of commodities investment firm LOGIC Advisors in Upper Saddle River, New Jersey.

Spot gold rose as much as 3 percent to its highest since Sept. 8 at $1,266.11 an ounce, and was up 2.3 percent at $1,258.21 by 2:42 p.m. EST (1942 GMT).

Chart-based buying accelerated the rally to around $1,250 and then at the 200-day moving average above $1,253, O'Neill noted, adding that $1,280 is the next near-term target.

"This was a gold rally," O'Neill said, pointing out that the typically more volatile silver market rose only slightly and failed to garner any significant spillover support.

U.S. gold futures for delivery in February rose 2.5 percent to settle at $1,264.80 an ounce.

"Gold is gaining from a risk-off situation because nobody expected the Swiss central bank not to keep that cap, and this has created potential big losses in many places and is obviously triggering some flight to safety," said Ole Hansen, Saxo Bank senior manager.

U.S. stocks were on course for a fifth straight day of losses, and yields on U.S. 30-year Treasuries bonds struck a record low for a second straight session after the Swiss National Bank's move.

The Swiss franc soared nearly 28 percent against the dollar, and the euro slid as much as 30 percent below the 1.20 cap to a record low of 0.8500 francs per euro.

"This is happening a week before the ECB meeting, which could add even further pressure to the euro ... more QE (quantitative easing) in the euro zone is a double-edged sword for gold in dollar-denominated terms but gold in euro terms should benefit," Hansen said.

Gold has benefited from years of increased central banks' liquidity following the 2008 financial crisis, but more monetary stimulus in the euro zone could result in a stronger dollar and, in turn, lower gold prices.

Euro-denominated gold rose to a new peak of 1,093.55 euros an ounce, its highest since May 2013.

UBS lowered its gold price forecast for the year to $1,190 from $1,200, saying it had underestimated the downside risks.

Silver climbed to a one-month high of $17.21 an ounce and was up 0.4 percent at $16.89 an ounce, while platinum rose 2.1 percent to $1,254.98 an ounce, and palladium gained 1.3 percent to $762.98 an ounce. (Additional reporting by A. Ananthalakshmi in Singapore; Editing by William Hardy, David Evans and Jeffrey Benkoe)

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below