Gold crosses $933 on rate cut hope

London: Gold and platinum hit historic highs for a third straight day yesterday and silver rallied to a 27-year peak on expectations of more US rate cuts and fears about South African output.

Spot gold rose as high as $933.10 an ounce and was quoted at $933.00/$933.90 by 1122 GMT, against $927.50/$928.20 late in New York on Monday. The metal has gained about 11 per cent so far this year.

Platinum hit $1,735 an ounce as buying accelerated after a power crisis forced miners in South Africa to stop operations last week. Prices later eased on profit taking.

"Gold has been supported by a positive day for stock markets in Asia and continuing problems in South Africa, but traders are also keeping a close eye on the euro/dollar rate," Tom Kendall, metals strategist at Mitsubishi Corporation, said.

"The market awaits US economic data and the outcome of the Fed meeting. Gold has already bounced $75 in just six days so it would not be surprising to see a period of consolidation or another short correction. But over the medium term, the bull market trend remains in place."

The dollar steadied against a basket of major currencies, with investors debating the likely size of a widely expected US Federal Reserve interest rate cut this week and the chances of a US recession.

The Fed lowered rates by 75 basis points last week, and is expected to cut again by as much as 50 basis points when its two-day scheduled meeting ends on Wednesday. Weaker-than-expected US housing data on Monday backed the case for growth-boosting monetary easing.

A rate cut tends to weaken the dollar as investors look for alternative assets, including gold, for better returns. Bullion prices also often move in the opposite direction of the dollar.

"Ongoing power outages in South Africa, coupled with dollar weakness, have triggered further investor and speculative related buying in the metal," TheBullionDesk.com said.

Short term

"Short term, gold is vulnerable to pockets of profit taking. However, given the concerns regarding the health of the US economy and the prospect of lower interest rates, dips will continue to find good volumes of buying interest," it said in a daily note.

AngloGold Ashanti said on Tuesday it had restarted production at one of its seven mines although a power crisis remained largely unresolved.

AngloGold's two main gold-producing rivals in South Africa were still unable to produce at full capacity at any of their mines, and said they hoped they could get more power.