LONDON -- Gold and silver hit multi-month highs in Europe on Wednesday, with gold breaking above US$1,250 an ounce for the first time since late June, as investors bought the metals amid concerns over the pace of U.S. economic growth.
Spot gold hit a high of US$1,254.25 an ounce and was at US$1,252.75 an ounce at 11:32 GMT, against US$1,248.99 late in New York on Tuesday. Silver hit its highest since May 17 at US$19.54 an ounce and was later at US$19.42 an ounce against US$19.34.
Deutsche Bank analyst Daniel Brebner said concerns over economic activity in the United States were leading to “a growing acceptance that if conditions remain poor or deteriorate further, the Fed will move to support growth.”
“There is an expectation that deflationary risk is being actively mitigated, and that the risk longer term is increasingly one of inflation,” he said.
“That, and perhaps longer-term concerns over volatility in forex and interest rates, is sending some increased capital into the precious metals.”
Concerns over the outlook for the U.S. economy and a return of worries over euro zone sovereign debt levels have led to volatility in equities and other assets seen as higher risk in the past month, boosting gold’s appeal as a haven.
European shares advanced on Wednesday to a near two-week high, lifted by a manufacturing rebound in China and corporate takeover talk in the market. U.S. stock futures also pointed to a higher opening on Wall Street.
On the foreign exchange markets, the euro EUR climbed 0.9% against the dollar, while the Japanese yen steadied against the U.S. currency after hefty gains.
Commodities largely firmed, with oil rising 0.8% after the Chinese data, having fallen in the previous session, and base metals ticking higher.
On the investment side of the bullion market, holdings of the major gold and silver exchange-traded products, which issue securities backed by physical stocks of the precious metals, rose on Tuesday, suggesting healthy investor interest.
The world’s largest gold-backed exchange-traded fund, New York’s SPDR Gold Trust, added another 4 tonnes of metal to its stocks, while the largest silver ETF, the iShares Silver Trust, increased its holdings by more than 30 tonnes.
The SPDR reversed July’s outflows to record a monthly gain in its holdings in August. Swiss bank UBS said gold holdings of the 12 ETFs it tracks rose 1.38 million ounces in August.
“While (that) was modest compared to May’s 4.8 million ounces and June’s 2.6 million ounces, the trend of rising ETF appetite is important for market sentiment, and indeed the longevity of gold’s current rally,” it said in a note.
“For gold to make a convincing attempt at the previous record high of US$1,265, ETF buying will need to intensify.”
Among other precious metals, platinum was at US$1,534 an ounce against US$1,516.40, while palladium was at US$513.50 against US$496.70, off a peak of US$516.50.
Palladium rose 4% to its highest since mid-May in earlier trade, lifted by strength in the gold price and weakness in the dollar, which has helped industrial commodities to climb.
The metal is also broadly supported by its fundamentals, traders said, with demand from major consumers like carmakers seen rising as economic growth picks up. “People still like palladium in the longer term,” said one trader.
Investors are continuing to eye the prospect of strike action in South Africa, source of four out of five ounces of the world’s platinum.
South Africa’s National Union of Mineworkers said 8,000 workers at Northam Platinum voted in favour of a strike. The NUM said notice to strike at Northam will be served Wednesday afternoon.
