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Gold climbs 1.5 pct after rate decisions



February 05, 2009 – Comments (0) | RELATED TICKERS: RGLD , GOLD , EGO

Thursday February 5, 02:06 PM


Gold climbs 1.5 pct after rate decisions

By Jan Harvey


LONDON (Reuters) - Gold was up 1.5 percent after the European Central Bank said it will keep interest rates on hold and the Bank of England said it would cut by half a percentage point, supported by buying of the metal as a haven from risk.

Traders are eying a press conference that will follow the ECB's rates announcement for clues as to how it plans to tackle the economic downturn.

Spot gold was quoted at $919.35/921.35 an ounce at 1:34 p.m., up from $904.70 in New York late on Wednesday.

U.S. gold futures for April delivery on the COMEX division of the New York Mercantile Exchange rose $18.60 to $920.20 an ounce.

"The backdrop of rate cuts has been supportive for gold over the last few weeks and months, mainly on the fear of inflation further down the line," said VM Group analyst Matthew Turner. "Today's moves were just a confirmation of that theme."

The dollar lifted from lows against the euro after the ECB announcement. ECB president Jean-Claude Trichet had already flagged that no rate cut was on the cards.

Interest in gold as a safe store of value also fuelled buying among risk-averse investors.

Interest in physical bullion in the form of coins and bars and investment products such as gold-backed exchange-traded funds has soared as fears over the outlook for the global economy has made asset prices volatile.

Investors also fear the large amount of government debt poured into the banking sector will fuel inflation.

"The fact that gold as an asset class has more trust in it than a lot of other financial products out there at the moment means people are continuing to push money in there," said Commerzbank trader Rory McVeigh.

"There has been steady buying of small investment-type physical gold, particularly in Europe, and exchange-traded funds."

The world's largest bullion-backed ETF, New York's SPDR Gold Trust, said its holdings hit another record on Wednesday, rising to 859.49 tonnes.


Goldman Sachs lifted its three-month gold forecast to $1,000 an ounce from $700 an ounce, citing safe-haven demand for gold.

"The gold price rally has been driven by surging demand for gold in all forms: physical gold, exchange traded funds and futures contracts and investors seek a 'safe store of value'," the bank said in a note.

"It is also important to emphasise that the recent strong demand for gold has not been irrational, but rather pretty much in line with the probabilities of financial and sovereign default."

Silver climbed to $12.82/12.90 an ounce against $12.51 late in New York on Wednesday. Platinum was quoted at $986/991 an ounce against $964.

Aquarius Platinum , the world's fourth-largest producer of the white metal, cut its 2009 production target by 100,000 ounces to 475,000 ounces, and said its output fell 6 percent in 2008 from the year before.

"News of platinum producers struggling with costs and production may help platinum prices move higher, although continuing negative news on auto sales may hold prices back," Fairfax analyst John Meyer said.

Palladium meanwhile firmed nearly 4 percent to $200/204 an ounce from $194, driven by buying for palladium-backed ETFs, dealers said.

(Editing by Peter Blackburn)

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