GOLD rose 2 per cent overnight, boosted by weak US consumer confidence data, euro zone debt fears and a call by the Chicago Federal Reserve’s president for further action to help the US economy.
Gold accelerated gains early after Chicago Fed President Charles Evans told CNBC television he backs “some of the most aggressive policy actions” being considered by the Fed, adding the labour market looks to be in a recession.
Other perceived safe havens, such as Treasuries, also rose after data showed US consumer confidence crumbled in August to its lowest in more than two years.
A weaker-than-expected report on euro zone economic sentiment and renewed debt fears on Greece and Europe also boosted bullion buying.
“The weak US and European confidence data brought economic worries back to the forefront. There was strong European physical gold buying due to significant concerns about the growth prospect,” said Frank McGhee, head precious metals trader at Integrated Brokerage Services LLC.
Bullion has gained as much as 8 per cent in the last three sessions, supported after Fed Chairman Ben Bernanke last Friday raised hopes for a new market stimulus program.
Spot gold was up 2.7 per cent at $US1,835.19 an ounce by 2.38pm EDT (0438 AEST). Gold fell more than one per cent last week, when investors stripped more than $US200 off the price after it hit a record $US1,911.76 on August 23.
US gold futures for December delivery settled up $US38.20 at $US1,829.80 an ounce. Trading volume was modest but below the record levels logged last week.
Silver rose 1.6 per cent to $US41.44 an ounce.
Gold added slightly to gains after minutes from the Fed’s August 9 meeting showed the central bank considered a range of actions to help the US economy, including the unprecedented step of tying the interest rate policy outlook to a specific unemployment level.
“Certainly, there is very little confidence among the major macro-type investors about which way the global economy is going to go over the next three to six months,” said Tom Kendall at Credit Suisse.
“There is very little conviction one way or the other and that is very supportive of gold,” he said.
Despite Evans’ pro-stimulus comment, Minneapolis Fed President Narayana Kocherlakota on Tuesday stopped well short of signalling support for further easing.
The Fed is caught between a struggling recovery and high unemployment on one side, and political pressures against more monetary easing on the other. It has already pushed interest rates close to zero and bought $US2.3 trillion in bonds to try to lower longer-term borrowing costs.
Analysts now look forward to clearer guidance from the Fed’s next meeting in September, which has been extended for an extra day to consider possible further actions to boost economic growth.
Physical demand for gold is holding firm, and buying is expected to pick up in top consumer India, where the wedding season, traditionally the period of highest bullion demand, gets under way in September.
Analysts also cited strong physical buying from the Muslim celebration at the end of Ramadan, the Eid al-Fitr festival, a major gold-buying event.
Among platinum group metals, platinum was last up 1.9 per cent at $US1,852 an ounce, and palladium rose nearly three per cent to $US772.25 an ounce.
