Gold rose the most in a month as a slide in European and US equities boosted demand for precious metals as a store of value. Silver also climbed.
Europe’s Dow Jones Stoxx 600 Index sank as much as 3.9% on prospects for lower profits from metals producers BHP Billiton and Anglo American. Analysts estimate earnings at companies in the Standard & Poor’s 500 Index fell for the seventh-straight quarter through March. Some investors buy gold as an alternative to holding company shares.
"Gold prices today are firmer as European equity markets and US equity futures are in negative territory,” said Bayram Dincer, a Dresdner Bank commodity analyst in Zurich. "Gold’s short-term direction is determined by equities."
Gold futures for June delivery jumped $US19.60, or 2.3%, to $US887.50 an ounce on the Comex division of the New York Mercantile Exchange. That’s the biggest gain since March 19.
Gold may "very likely" rise to as high as $US890 an ounce this week, Dincer said. "Today’s gold price is even more impressive as the US dollar rises."
The US Dollar Index, a six-currency gauge that includes the euro and yen, climbed as much as 1% to 86.871 and has risen for five straight sessions. The index has gained 6.5% this year.
Silver futures for May delivery jumped 31.5 cents, or 2.7%, to $US12.105 an ounce on Comex. The price still has tumbled 32% in the past year.
"Gold will continue to trade inversely to equities," said Tom Pawlicki, a metals analyst at MF Global in Chicago. "A long-term bottom has been made in equities, and therefore, a long-term top has been made in gold. If the equity correction lasts for a couple weeks, it could push gold up to around $US915 and $US930 an ounce, but not much higher."
Last week, the yellow metal slid 1.7%, the fourth- straight drop and the longest stretch of weekly losses since August. The most-active contract still is down 3 percent in the past year and 4.1% this month.
Investment in Zuercher Kantonalbank’s exchange-traded fund, the ZKB Gold ETF, rose to 4.54 million ounces as of April 17 from 4.508 million ounces a week earlier, figures e-mailed today from Zurich-based ZKB show. Silver holdings rose to 45.71 million ounces from 45.26 million, and platinum holdings also gained.
"Gold is supported by a rise in risk aversion, which is also reflected in a sharp sell-off on the equity markets," Michael Widmer, an analyst at BNP Paribas SA in London, said in an e-mailed comment.
"Gold is higher based on safe-haven" buying today, Pawlicki said. "European and US equities are correcting lower on the government’s decision to not let banks out of TARP, discussions about Internet sales-tax collection, and warnings from President Obama and ECB’s Trichet that more pain lies ahead for the economy."
President Barack Obama said yesterday he will demand "accountability" from US banks that require additional taxpayer money following "stress tests" being conducted by regulators. The tests are being used to determine whether the companies have enough capital to cover expected losses during the next two years should the recession worsen.
Gold also rallied because of expectations that a seasonal increase in demand from India, the world’s biggest buyer, will emerge later this month, said analysts including MF Global Edward Meir in Darien, Connecticut.
