January 16, 2015 / 4:10 AM / 4 years ago

PRECIOUS-Gold poised for best week in nearly a year on safe-haven demand

(Updates prices)
    By A. Ananthalakshmi
    SINGAPORE, Jan 16 (Reuters) - Gold traded near its highest
level in four months on Friday and looked set to post its best
week in ten months, as investors sought safety from market
volatility after Switzerland unexpectedly scrapped a cap on the
franc.
    Spot gold was firm at $1,259.80 an ounce by 0728 GMT,
after jumping to $1,266.11 on Thursday, a level last reached in
September.
    Thursday's volatility in global markets saw investors
channelling money towards gold, often seen as an alternative
investment to riskier assets. A breach of some key technical
levels also pushed gold higher.
    The metal is up about 3 percent for the week, its biggest
weekly jump since March last year.
    "Gold looks like the flavour of the month at the moment and
has now pushed above some key downward trend lines against the
dollar," said James Gardiner, a trader at MKS Group. 
    "The SNB announcement has really shaken the market," he
said, adding that gold may see some momentum buying today.
    Gold has gained over 6 percent so far this month, after two
annual declines.     
    The Swiss National Bank shocked financial markets on
Thursday by scrapping a three-year-old cap on the franc, sending
the currency soaring against the euro and stocks plunging on
fears for the export-reliant Swiss economy. 
    The U-turn sent the franc nearly 30 percent higher against
the euro in chaotic early trading. Coming a week before the
European Central Bank is expected to unveil a bond-buying
programme to counter deflationary pressures, it fed speculation
that this quantitative easing scheme will be so big that the SNB
would have struggled to defend the cap. 
    The Swiss move sent most European shares soaring while bond
yields and Swiss equities tumbled. U.S. stocks closed lower,
marking a fifth straight session of losses. 
    Asian shares stumbled on Friday and the dollar skidded
against the safe-haven yen after Switzerland's unexpected move.
    In a reflection of improving investor confidence, SPDR Gold
Trust, the world's largest gold-backed exchange-traded
fund, said its holdings rose 1.35 percent to 717.15 tonnes on
Thursday.
    "Gold may be lifted further as the repercussions of the SNB
action continue to reverberate in the markets and portfolio and
real money managers decide on how to allocate holdings in light
of franc developments. These actions will likely buoy gold, at
least for a while," said HSBC analysts.
    Physical demand, however, has seen a setback with the higher
prices putting off buyers in Asia, the top consuming region.
    In China, premiums on the Shanghai Gold Exchange fell to
$1-$2 an ounce over the global benchmark, from about $3-$4 in
the previous session, indicating softer demand.
        
    PRICES AT 0728 GMT 
 Metal            Last     Change   Pct chg
                                    
 Spot gold         1259.8    -1.36    -0.11
 Spot silver        16.97     0.09     0.53
 Spot platinum     1254.8     0.81     0.06
 Spot palladium     769.5     6.52     0.85
 Comex gold        1260.4     -4.4    -0.35
 Comex silver       17.03   -0.072    -0.42
 Euro               1.164                  
 DXY               92.223                  
                                    
 COMEX gold and silver contracts show the
 most active months
 
 (Reporting by A. Ananthalakshmi; Editing by Michael Perry and
Richard Pullin)
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