Gold tops $1,300 on weak dollar, stimulus hopes
New York (Jan 21) Gold climbed above $1,300 an ounce on Wednesday for the first time since August as a softer dollar, worries about the global economy and hopes of stimulus measures from the European Central Bank (ECB) fuelled demand.
Spot gold hit its highest level since Aug. 18 at $1,303.20 an ounce in early trade and was up 0.3 percent at $1,296.33 by 1102 GMT.
U.S. gold futures for delivery in February were up 0.3 percent at $1,297.40 an ounce.
The dollar fell 0.3 percent against a basket of currencies, mostly due to a stronger yen after the Bank of Japan kept its monetary policy steady against expectations for more easing.
A softer greenback makes dollar-denominated gold cheaper for holders of other currencies.
Financial markets have been nervous about the ECB policy meeting on Thursday, when the bank is widely expected to unveil a quantitative easing (QE) programme.
Traders also expected the prospects of looming deflation and increased market volatility to support demand for gold.
"We have seen this month the largest SPDR inflows since Aug. 2012 when the Fed was revving up to do QE3 - so ECB QE is having a similar impact," Macquarie analyst Matthew Turner said.
"The issue seems to be about central banks' control of the situation - there is this impression that things are getting a bit out of control again," Turner added. "The risk here for gold is that tomorrow and then next week at the Fed meeting they reassert their control."
Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, jumped 1.55 percent to the highest level since Oct. 29 at 742.24 tonnes on Tuesday.
Bullion has risen 10 percent since the beginning of the year, with its appeal as a hedge against risk burnished by economic uncertainties in Europe, driven by concerns about a possible Greek default.
Markets were focusing on Sunday's snap election in Greece with polls suggesting anti-bailout party Syriza will win, which may set off fresh turmoil in the euro zone.
Worries over the health of the global economy have added to gold's appeal. On Tuesday the IMF cut its forecast for global growth in 2015 and called on governments and central banks to pursue accommodative monetary policies and reforms.
Among other precious metals, spot silver jumped more than 2 percent to its highest since Sept. 9 at $18.32 an ounce before easing back to be up 1.5 percent at $18.16. Palladium rose 0.6 percent to $775.50 an ounce to stretch its rise to a third session, while platinum was up 0.3 percent at $1,278 an ounce.
Source: Reuters
