Gold futures rose the most in three weeks as central banks reduced costs for borrowing dollars to ease Europe’s fiscal woes, boosting demand for the precious metal as an inflation hedge.
The move by the Federal Reserve and five other central banks spurred rallies in equities and commodities. China cut the amount of cash that banks must set aside as reserves for the first time since 2008 as Europe’s debt crisis dims prospects for exports. Gold has rallied 23 percent this year.
“China is concentrating more on growth rather than worrying about inflation,” James Cordier, the founder of Optionsellers.com in Tampa, Florida, said in a telephone interview. “Efforts by central banks are very positive for gold.”
Gold futures for February delivery advanced 1.8 percent to settle at $1,750.30 an ounce at 1:41 p.m. on the Comex in New York, the biggest gain for a most-active contract since Nov. 7.
The metal is headed for the 11th straight annual gain after reaching a record $1,923.70 on Sept. 6 as investors seek better returns than equities and some currencies. Holdings in exchange-traded products backed by gold climbed 2.9 metric tons to an all-time high of 2,354.5 tons yesterday, data compiled by Bloomberg show.
The cut in reserve rations “is highlighting problems in China,” John Meyer, an analyst at Fairfax IS in London, said in a telephone interview. “It’s a grave concern to investors” and may support demand for gold as a haven, he said.
Silver futures for March delivery rose 2.7 percent to $32.804 an ounce in New York.
On the New York Mercantile Exchange, palladium futures for March delivery surged 4.9 percent to $612.60 an ounce, the biggest gain since Oct. 21. Platinum futures for January delivery rose 1.3 percent to $1,560.80 an ounce.