NEW YORK (Reuters) - Gold prices jumped over 1.5 percent and silver streaked toward a 30-year high on Tuesday, as thin volume and bullish hopes for next year drove bullion above $1,400 an ounce for the first time in two weeks.
Precious metals held their gains to trade at the day’s highs even after the U.S. dollar reversed deep early losses. Data showing an unexpected deterioration in U.S. consumer confidence and a sharp fall in U.S. single-family home sales fed gold’s rise as the dollar gyrated.
“There’s a little year-end rush to see if we can post some high numbers to mark the books against,” said Fred Schoenstein, a trader at Heraeus Precious Metals Management in New York. “Volumes are very low so it doesn’t take a lot to push it.”
A sharp rise in U.S. Treasury yields after dismal demand at an auction of five-year notes may have also fueled inflation concerns that added to gold’s allure. <US/>
After several weeks of trendless trade, gold staged its biggest one-day gain since December 3 as many investors bet that economic uncertainty and currency diversity would fuel more demand from investors and banks. Prices are on track to rise 28 percent this year, a record 10th consecutive annual gain.
After modest early gains, spot gold shot more than $20 an ounce higher in early U.S. trade, closing up 1.57 percent at $1,406.75 an ounce, near the day’s high.
U.S. gold futures for February delivery rose 1.64 percent, or $22.70, to $1,405.60. Trading volume picked up from Monday’s lackluster activity, with over 106,000 lots, still only about half the norm. Volumes were subdued by a British holiday and lack of official gold fixings.
Silver led the rally as it has for the past few months, with traders rushing to clamber on board one of the best-performing commodities this year.
After pacing gold earlier, spot silver shot ahead, jumping 3.4 percent to $30.26 an ounce, nearing the 30-year high of $30.68 touched on December 7. Prices have surged nearly 80 percent this year versus gold’s 28 percent rise.
The gold-silver ratio, used to measure how many ounces of silver is used to buy an ounce of gold, slumped to a new 46-month low of 46.4, extending its steady decline since August. It has averaged about 63 over the past year, and dropped below 45 only twice in the past 25 years.
“I don’t think it’s unrealistic to see silver make a shot for $30.50 or $30.75 before the end of the year. But gold, I’d be very surprised to see it back to its highs,” said Schoenstein. He added that the precious metals could yet succumb to year-end profit-taking later this week.
The dollar gyrated through the session, setting a record low against the Swiss franc and hitting a 6-1/2-week low against the yen after Japan reported its factory output rose in November for the first time in six months. The dollar index .DXY closed fractionally higher on the day. <FRX/>
The latest set of indicators appeared to paint a more downbeat picture of the U.S. economy, at odds with other recent signs showing the recovery is accelerating and boosting demand for gold as a shelter from uncertainty.
The Conference Board, an industry group, said its index of consumer attitudes slipped to 52.5 in December from an upwardly revised 54.3 in November. The Standard & Poor’s/Case-Shiller composite housing index of 20 metropolitan areas declined 1 percent in October from September.
Independent investor Dennis Gartman, at times cautious on gold’s rally this year, said he was now expanding his position by buying bullion in U.S. dollar terms as central banks stock up.
“We are long of gold in non-U.S. dollar terms, and now we wish to add to the position by buying gold in U.S. dollar terms,” he said in his daily Gartman Letter.
“This is consistent with our thesis that gold is, at the margin, becoming a reservable asset of greater interest by the reserve banks of Asia, Africa and likely also South America. At the margin, they are increasing their gold holdings at the expense firstly of the EUR (euro) and now of dollars.”
Next year is expected to mark the end of a lengthy trend of official sector bullion sales, with central banks globally turning net buyers for the first time in decades. Investors are also expected to continue piling in.
Spot gold is biased to rise to $1,410 per ounce as an upward wave "c" is unfolding toward an eventual target at $1,430, said Wang Tao, a Reuters market analyst. (For a graphic on the outlook see: link.reuters.com/wet83r)
“Asians have been non-stop buyers, and want to load up when gold is some 40 bucks off the all-time highs,” a Singapore-based trader said.
Editing by Dale Hudson
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