GOLD futures are surging as investors seek shelter from the deepening financial sector turmoil in the aftermath of the overnight co-ordinated global interest rate cuts. Analysts expect the metal to continue attracting safe-haven buying Gold futures soared in the wake of the US Federal Reserve cutting the federal funds target rate by 50basispoints to 1.5 per cent, a move echoed by several central banks around the world. But instead of assuaging investors' concerns, the co-ordinated central bank action highlighted the troubles with the global financial system and created worries about longer-term inflationary expectations, traders said. Gold was trading on the Comex division of the New York Mercantile Exchange up $US30, or 3.4percent, at $US912 an ounce. The metal was likely to rise even further as long as the financial problems persisted, said Stephen Platt, an analyst with Archer Financial Services. "It is certainly in a panic state, and gold is benefiting from that panic," he said. "Once that panic exhausts itself, then we will probably see pressure come to bear on gold." For one thing, he said, fabrication demand was likely to weaken. Analysts often point to higher prices and slower economic growth as factors that can curtail fabrication demand for metals. Wisdom Financial senior trader Zachary Oxman agreed that gold prices would continue to appreciate as a safe-haven investment amid the rate cuts and with ongoing turmoil in the global markets. "Rate cuts are a boon for gold, so I would still expect to see gold rally," Mr Oxman said. Even if the $US700 billion ($1trillion) US financial rescue plan and the global rate cuts had the effect of stabilising the markets, that was unlikely to happen for several months or a year, and gold would be expected to benefit from continued uncertainty, he said. "You have still got a lot of upside there," Mr Oxman said. Normally, the US dollar index would tumble on changing interest rate differentials after a surprise Fed rate cut, thereby supporting gold. But the US currency's move has been limited since cuts were also announced by the Bank of Canada, Bank of England, European Central Bank, Sweden's Riksbank and the Swiss National Bank. "It is a demonstration from Fed officials and governments in Europe as well that we are in economic and financial conditions that are not great and are deteriorating," said Carlos Sanchez, precious metals analyst with CPM Group. This had prompted safe haven buying from investors that was likely to continue, he said. Currency and stock markets remained volatile, there was a deterioration in lending and housing prices remained soft, Mr Sanchez said. There was uneasiness ahead of quarterly earnings reports due out in the coming weeks, plus there were already existing geopolitical worries involving countries such as Iran and Pakistan, and this was all supportive for gold, he said. News of the aggressive, co-ordinated central bank interest rate cuts, following Australia's 100 basis point cut on Tuesday, "should lead to gold surging in value in the coming months", Mark O'Byrne, executive director of the bullion dealer Gold Investments, said in his daily commentary. Competitive currency devaluations looked increasingly likely in order to combat massive asset deflation and wealth destruction, he said. "Nationalisation and quasi-nationalisation of banking systems and digital money printing on a scale not experienced in industrialised countries since Weimar Germany will make gold an absolutely essential asset to have in all portfolios in the coming months." A dissenting view is that gold is likely to see a capitulation top when Wall Street ceases to be front page news. "Then I think you can look for some trouble in gold" on the downside, said Sterling Smith, vice-president with FuturesOne in Chicago. If December gold weakened and fell below $US900, prices could fall all the way to $US820, said Mr Smith. But that would only happen once the global financial crisis calmed down. OptionSellers.com broker and futures analyst Michael Gross, expects gold to continue to draw flight to safety buying and be one of the stronger performing commodities over the next 30 to 60 days. "We do not expect a runaway rally in gold prices right now," he said. "But we expect gold to be firmer than other commodities over the short term. The flight to quality theme will continue." But at some point, whenever equities started to stabilise, gold might come under some pressure.

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