LONDON — Gold climbed more than 3 per cent to its highest level in more than a week on Wednesday, as the euro surged to a session peak versus the U.S. dollar and oil prices recovered from a 22-month low.
Platinum prices held firm after rallying as much as 3 per cent after an upbeat industry report from top platinum refiner Johnson Matthey on Tuesday and the announcement of mine closures triggered short-covering.
Spot gold rose to $762.30 (U.S.) an ounce, its highest level since Nov. 10 and was at $759.85 an ounce by 1502 GMT versus $736.35 an ounce in New York late on Tuesday.
“We're higher in euro/dollar and the oil prices gained since we have seen the lows this morning,” said Wolfgang Wrzesniok-Rossbach, head of sales at German metals trading group Heraeus.
The euro rose to a session high against the U.S. dollar in a move analysts said was related to a large buy order for the single currency. The euro rose suddenly to a session high of $1.2790 from around $1.2640. It last traded at $1.2782.
Oil prices, which sank to a 22-month low earlier in the day, erased gains and bounced. U.S. crude oil futures rose by 67 cents to $55.05 a barrel.
“There is not any physical demand at the moment, but the rise is more because of investors and speculators looking at the external factors such as oil prices and the dollar and reacting,” he said.
Gold tends to move in the opposite direction of the dollar as a strong U.S. currency makes bullion more expensive for local currency holders while firmer oil prices boost gold's appeal as a hedge against the inflation.
The metal now trades nearly 10 per cent down compared with the end of 2007 and has lost more than 26 per cent since it struck a record high of $1,030.80 an ounce in March.
Gold's gains lifted other precious metals, including platinum, which hit a session high of $850 an ounce on the back of short-covering sparked by Johnson Matthey's on Tuesday predicted demand could still rise and Lonmin's announcement the same day of mine closures.
Platinum was trading at $832.50 an ounce compared with $824.50 an ounce in New York late on Tuesday, when it gained around 2 per cent.
“Platinum has risen on the combination of short-covering and people taking the Johnson Matthey report as not perhaps being as bearish as they might have seen,” Tom Kendall, precious metals strategist at Mitsubishi Corp., said.
Precious metals refiner Johnson Matthey said global demand for platinum catalytic converters would climb 2 per cent in 2008 on higher consumption in Europe and emerging economies, despite a sharp decline in North America.
Prices were also supported by news that Lonmin, the world's third-biggest platinum producer, would close some of its high-cost mines and was cutting costs to survive a market downturn.
But analysts do not expect a major recovery in the platinum price as the demand from the auto sector, which has been severely affected by the global downturn, remains key.
More than 60 per cent of global platinum use goes to autocatalysts to clean exhaust fumes.
Platinum roared to a record $2,290 in March as a power shortage in main producer South Africa disrupted mining. But prices have tumbled since then on deteriorating car sales, and platinum also tracked declines in gold as fears about the global economic slowdown deepened.
Silver was at $9.74/9.82 from $9.60 and palladium at $211.00/219.00 from $213.
