While the markets lost some steam on Thursday, apparently hungover from the rally on Wednesday when the Federal Reserve said that they will not start tapering their asset purchases yet, investors looked to gold again as the Fed continues to print money.
December contracts, the most actively traded contracts on the Comex division of the New York Mercantile Exchange, shot ahead $61.70, or 4.5 percent, to end Thursday’s session at $1,369.30 per ounce. Regular trading hours for the contracts had ended on Wednesday before the news was delivered. Gold had ended Wednesday modestly lower, down 0.1 percent at $1,307.60 per ounce.
Thursday’s rise was gold’s best one-day percentage and dollar run for the most actively trading contract since March 2009.
Monetary stimulus by central banks tends to be supportive of gold prices as it usually devalues currencies and increases the luster of gold as a “safe haven” amid tough economic times. Stateside, the devaluing of the greenback supports higher gold prices because bullion is based in USD, making it less expensive to investors using a foreign currency.
The ICE Dollar Index, which measures the greenback against a basket of six leading world currencies, lost 1.3 percent in trading on Wednesday to hit its lowest level since early in February. The index was trading lower in the morning, but has recovered to be up by 0.14 percent nearing the 3 o’clock hour ET.
Previous versions of stimulus by the Federal Reserve have been largely attributed to the rise in gold from 2009 to peaks in mid-2011. The third iteration of quantitative easing didn’t have a similar impact with concerns rising about overbought conditions and global demand as traders jumped both feet into equities, driving them to record highs.
Silver rolled on Thursday as well, actually outpacing its higher-priced cousin on a percentage basis. Silver for December delivery leapt ahead 7.6 percent to $23.29 an ounce, its highest closing price since September 10. Silver had run from under $19 at the end of July to break through $25 per ounce (for the first time since mid-April) on August 28, but has been slipping since.
Copper wasn’t left out of the rally, as December contracts jumped ahead about 2 percent to $3.345 per pound, its highest closing price since August 26.
Platinum for October deliver was the most active contract for the white metal, rose 3.4 percent to $1,473 per ounce while December palladium rose 5.0 percent to $738.20.