Spot gold rises to one-week high of $1,682.90/oz after U.S. 4Q GDP
* Gold market players look ahead to Fed decision
* Ultra-loose monetary policies to keep lending support (Adds comments, updates prices)
By Clara Denina
London, Jan 30 (Reuters) – Gold rallied to a session high of $1,682.90 an ounce on Wednesday, reasserting its safe-haven properties after U.S. growth data missed expectations and dented appetite for riskier assets.
The U.S. economy unexpectedly contracted in the fourth quarter, suffering its first decline since the 2007-09 recession as businesses scaled back on restocking and government spending plunged.
Spot gold rose as much as 1.1 percent to a one-week high of $1,682.90 an ounce. It stood at $1,680.66 an ounce by 1633 GMT.
U.S. gold futures for February delivery were up 1.2 percent at $1,680.70 an ounce.
Investors are now waiting for the U.S. Federal Reserve’s monetary policy decision and following statement, which is expected to confirm it will stick with its monthly bond-buying programme until unemployment rates drop significantly, a stance that should benefit bullion.
“The surprisingly weak 4Q GDP for the U.S. and today’s FOMC meeting are the driving forces behind gold’s spike up,” Societe Generale analyst Robin Bahr said.
“Clearly the Fed will continue to have to support a soft economy to buying of various assets for the foreseeable future, because the economy didn’t really pick up, continuing the steady growth pace of the third quarter,” he added.
Gold analysts say ultra-loose monetary policies adopted by central banks in key economies will not change soon. These are seen as positive for the metal, as rampant cash printing would undermine currencies.
“Policy makers’ caution towards the economy suggests that the stimulus measures are unlikely to be taken away anytime soon, which will support gold prices,” Sharps Pixley said in a note.
But some feel that the market has already priced in that quantitative easing is supportive for gold and take the view that the FOMC statement may not prove sufficient to justify a rise towards the key $1,700 mark.
“Theoretically, monetary easing would be very bullish for gold but the Fed’s money is not leaving the balance sheet and it’s not going out into the real wider world, creating inflationary pressures,” Bahr said.
Investors are also waiting for nonfarm payrolls data on Friday for a close look at the U.S. labour market. Economists surveyed by Reuters expect steady hiring from employers in January, helping unemployment to stand unchanged from a month earlier at 7.8 percent.
Among other markets, spot silver followed gold higher, rising two percent to $32 an ounce.
Spot platinum rose 0.6 percent to $1,684.50, while palladium was up 0.6 percent at $749, having hit a fresh 16-month high of $756 an ounce.
Gains for the more industrial precious metals were more limited, as disappointing data may affect future demand from the important automotive sector.
The platinum group metals are however supported by signs of growth in key markets like China.
“The solid, albeit moderate, pace of growth of the U.S. economy and perhaps more importantly the likelihood of a re-emerging China could support continued advances in metal values through 2013,” U.S. PGMs recycler A-1 said in a report.
A-1 sees platinum prices trending between 5 percent and 10 percent higher through the first few months of the year.
It expects palladium to increase to around $800-825 an ounce, supported by the loss of supplies from Russian stocks, possible further episodes of unrest in South Africa and Chinese economic recovery.
Reuters – Wed Jan 30, 2013 12:14pm EST