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Gold rises 3% on weak dollar and oil rally ahead of Fed decision
Gold jumped more than three per cent in Europe on yesterday, as a weak dollar and oil's climb boosted bullion ahead of the US Federal Reserve's key decision on interest rates.
- Reuters
- Published: 23:43 October 29, 2008
London: Gold jumped more than three per cent in Europe on yesterday, as a weak dollar and oil's climb boosted bullion ahead of the US Federal Reserve's key decision on interest rates.
Gold's rally boosted silver more than five per cent and helped platinum to bounce after a sharp fall due to demand worries, while palladium also gained 5 per cent on bargain-hunting.
Spot gold rallied to $767.00 an ounce and was quoted at $760.10/$762.60 an ounce at 1255 GMT, up more than two per cent from $744.30 in late New York trade on Tuesday.
Mitsubishi metals strategist Tom Kendall said the rise was partly because of weaker dollar and also due to rising commodity and equity markets across the board. "We see buying coming back in across a lot of asset classes. I think the selling from last week proved to be a little overdone," he said.
Kendall added the anticipation of a rate cut from the Fed was another element that boosted the prices.
The dollar fell against other major currencies, as markets expected the U.S. Federal Reserve to deliver a substantial interest rate cut. A reduction in rates is widely expected, but the scope of the cut is uncertain.
In early New York trading, the euro was up 0.3 per cent per cent against the dollar at $1.2755. Against the yen, the euro was down 1.5 per cent at 123.82 yen but still well above recent six-year lows below 114 yen.
The dollar was down 1.7 per cent against the yen at 97.06 yen, having gained more than 6 per cent on Tuesday, its biggest one-day rise in 34 years.
"After a 66 per cent probability of a 50 basis point rate cut yesterday, interest rate futures now pencil in 62 per cent - which demonstrates the uncertainty of financial market participants," said Standard Bank analyst Manqoba Madinane.
China cut interest rates yesterday for the third time in six weeks to help the world's fourth-largest economy ride out the reverberations of the global financial crisis.
Rise in other commodity markets help boost gold prices. Copper surged nearly eight per cent and lifted other industrial metals higher while oil gained above $65 a barrel, boosted by a surge in global stock markets. European shares were up nearly 5 per cent.
Firmer crude typically benefits gold, which is often bought as a hedge against oil-led inflation. Rising oil prices also tend to boost interest in commodities as a whole.
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