Gold heads for biggest gain in 3 months; stocks slide
Chicago (Jan 23) Gold surged 2 percent on Thursday, set for its biggest one-day rally in three months, as sharp losses in U.S. equities and disappointing Chinese manufacturing data boosted bullion's safe-haven appeal.
Buying of the metal accelerated after prices broke through the previous session's high at $1,244 an ounce, an area of chart resistance, analysts said.
Platinum meanwhile largely shrugged off the impact of a strike at South African mines producing half the world's supply of the metal, with consumer demand expected to be met from ample above-ground stocks.
Spot gold was last up 2.1 percent to $1,262 an ounce, while U.S. gold futures for February delivery rose 2 percent to $1,263 an ounce.
"Just like the sell-off last week was triggered by overextended longs, today's move was triggered by the false break below $1,236 earlier, which got a few too many involved on the short side," Saxo Bank's head of commodities research Ole Hansen said. "The bounce got wings with the help from a weaker dollar and the story from India."
The leader of India's ruling Congress party, Sonia Gandhi, has asked the government to review tough import restrictions on gold, which include a record 10 percent import duty, a television channel said on Thursday.
"Following the downside rejection earlier today, gold is once again testing the downtrend from last January at $1,255," Hansen added.
"A close above that level today will give the bulls something extra to cheer about and raise a few concerns among those in the hedge funds community still holding short positions."
The dollar slipped 0.7 percent against a basket of currencies on Thursday, putting it on track for its biggest one-day fall since October.
Investment interest in gold remains soft. Holdings in the SPDR Gold Trust, the largest gold-backed exchange-traded fund and a good measure of investor sentiment, fell 1.20 tonnes to 795.85 tonnes on Wednesday.
Metals consultancy Thomson Reuters GFMS said in a report on Thursday that improving global economic health meant gold would not significantly rebound anytime soon, with prices expected to fall another 13 percent after 2013's crash caught out investors.
Prices are set to average $1,225 an ounce this year, GFMS said, down from 2013 and close to current spot prices of $1,239. "The level around $1,200 is where we see a long-term floor come in for gold," GFMS manager Andrew Leyland said.
