LONDON (Reuters) - Gold surged almost 3 percent to above $910 per ounce on Thursday, while platinum hit a historic high above $1,600 as investors seized on dollar weakness and firm oil to snap up precious metals, analysts said.
Expectations of a further rate reduction by the U.S. Federal Reserve after a hefty emergency cut this week also boosted market sentiment, with a low real rate interest environment favoring gold, they added.
Spot gold hit a high of $910.50 an ounce and was quoted at $907.00/907.70 by New York’s last quote at 2:15 p.m. EST, compared with $884.75/885.45 late in New York on Wednesday. It hit a record high of $914 on January 14.
The active gold contract for February delivery at the COMEX division of the New York Mercantile Exchange settled up $22.70 or 2.6 percent to $905.80 an ounce.
Dealers and analysts said tough talk on inflation in the euro zone from ECB Governing Council member Axel Weber had concentrated investors minds on the prospect of further dollar weakness ahead of the Fed meeting next week.
As a weaker dollar makes gold cheaper for non-U.S. investors, gold was ripe for another rise, they added.
“Gold had to undergo a significant pullback and its already had that,” said David Thurtell, metals analyst at BNP Paribas.
“Maybe when we get the next Fed rate cut, people will see that dollar-weakness has further to run,” he added.
Platinum jumped to a record high of $1,612 an ounce, helped by gains in gold and after Lonmin Plc LMI.L, the world’s No.3 platinum producer, cut its sales outlook for the year.
The metal was last quoted at $1,607/1,612, against $1,551.50/1,556.50 late in New York on Wednesday.
“Platinum prices are set to outperform again this year given the historically low level of inventories and potential supply disruptions coupled with robust demand particularly from the auto-catalyst sector set to keep the market balance in deficit,” Barclays Capital said in a note to clients.
Oil climbed above $89 a barrel, aiding gold as a hedge against oil-led inflation, after a late surge in U.S. stock indices helped cool fears of a recession in top energy consumer the United States. U.S. crude futures finished up $2.42 or 2.8 percent at $89.41 a barrel.
Stock markets were cheered due to hopes a U.S. government plan to rescue ailing bond insurers would help stem credit losses.
Gold fell sharply earlier this week, partly due to tumbling global share prices, which prompted selling of bullion to cover margin calls. However analysts said gold stood to benefit from enduring financial market turmoil as that would raise the metal’s safe haven profile.
For the medium term, the market remained bullish.
A Reuters global poll of 50 traders and analysts forecast average gold prices surging more than 20 percent this year and gold retaining most gains in 2009 as dollar weakness, market turmoil and inflation fears stoke investor interest.
In industry news, Peter Hambro Mining (POG.L), Russia’s second-largest gold miner, said it would take a year longer than planned to more than triple output to 1 million ounces.
Silver rose to $16.38/16.43 from its Wednesday close of $15.97/16.02 an ounce, while palladium was up at $370.50/375.50 an ounce, versus its previous finish of $362.50/367.50.
Additional reporting by Frank Tang in New York and Lewa Pardomuan in Singapore; Editing by David Gregorio