Gold prices hit two-week highs above $1,690 an ounce on Tuesday after posting their biggest one-day rise since late January in the previous session, boosted by expectations that US interest rates will stay lower for longer and gains in the euro.
The metal held above the 100- and 200-day moving averages it broke through on Monday after the US Federal Reserve's signal that it would keep interest rates near rock-bottom levels reassured buyers that the opportunity cost of holding bullion would stay low.
Spot gold was up 0.1 percent at $1,693.50 an ounce at 11:35 SA time. Earlier it hit a two-week peak at $1,696.20.
Fed Chairman Ben Bernanke said on Monday that the economy needed to grow more quickly to cut the unemployment rate. While he did not directly indicate that the Fed was set to begin another round of bond purchases, he said a continuation of accommodative policies was needed to support faster growth.
“The Bernanke comments suggesting the possibility of further quantitative easing of monetary policy... pushed the US dollar lower and financial markets in general upwards, and so also gold,” said Commerzbank analyst Carsten Fritsch.
“The prospect of further liquidity injections should put pressure on the US dollar, and the prospect of continued negative real interest rates should also keep gold supported.”
The euro hit its highest in more than three weeks after Bernanke's comments, helping lift gold, and has since extended gains to a one-month peak.
Appetite for assets seen as higher risk, which largely strengthened on Monday, also held firm, with European shares climbing and oil and base metals prices rising.
US gold futures for April delivery were up $7.70 an ounce at $1,693.30. Options expiry is due on COMEX later in the day, with most call and put options concentrated around the $1,700 an ounce level.
ETFs RECORD INFLOWS
Gold exchange-traded funds, which issue securities backed by physical metal, reported inflows on Monday. Holdings of the largest, New York's SPDR Gold Trust, increased by around 6 tonnes, reversing some of the previous week's 10-tonne drop.
Demand for the yellow metal in major consumer India remained subdued, however, as a strike among jewellers in protest at a government import levy continued.
Silver was up 0.9 percent at $33.11 an ounce. Spot platinum was up 1.2 percent at $1,662.70 an ounce, while spot palladium was up 0.9 percent at $669.20 an ounce.
Platinum maintained its historically unusual discount to gold, which briefly reversed earlier this month, as buyers worried about demand for the white metal, which is chiefly used in autocatalysts.
Platinum prices are up more than 18 percent this year after a poor performance in 2011, but have struggled to maintain traction as worries persist over growth in the euro zone, a key market for platinum-heavy diesel autocatalysts.
“We remain of the view that the platinum market needs some production curtailments to improve the fundamentals over the next few years,” said Deutsche Bank in a note.
“The price recovery in the face of 'accidental' supply closures serves as a timely reminder of how susceptible the platinum industry is to disruptions,” it added.
“However, with the end of the Impala strike (earlier this year) and the reduced incidences of Section 54 stoppages, supply should recover, and the market is likely to end the year in another modest surplus - 105,000 ounces - in our assessment.” - Reuters