Gold rose to a four-week high on speculation that the Federal Reserve will take further steps to stimulate growth and as the European Central Bank said it will extend its offerings of three-month unlimited cash into 2013.
ECB’s President Mario Draghi said officials are ready to act as Europe’s growth outlook worsened. Atlanta Fed President Dennis Lockhart said that extending the U.S. central bank’s Operation Twist program is an “option on the table.” The strategy to replace $400 billion of shorter-dated maturities with longer-term debt to contain borrowing costs was scheduled to end this month.
“People will run to gold to hedge against inflation when the leaders decide to start printing money,” James Cordier, a portfolio manager at OptionSellers.com in Tampa, Florida, said in a telephone interview. “The market is pricing in some form of announcements on further stimulus measure as Europe is in turmoil and the U.S. is showing signs of slowdown.”
Gold futures for August delivery gained 1.1 percent to settle at $1,634.40 an ounce at 1:59 p.m. on the Comex in New York, after touching $1,642.40, the highest since May 7.
Bullion pared gains after the Fed said that the U.S. economy maintained a moderate pace of growth as factory output rose and the real-estate market improved. The price was 0.2 percent higher at $1,619.80 as of 2:49 p.m. in electronic trading.
The metal has gained 4.3 percent this year, after 11 consecutive annual increases.
Silver futures for July delivery jumped 3.8 percent to $29.488 an ounce in New York, the biggest gain for a most-active contract since Feb. 28.
On the New York Mercantile Exchange, platinum futures for July delivery added 2 percent to settle at $1,469.20 an ounce, the biggest gain since Feb. 22. Palladium futures for September delivery increased 2.1 percent to $632.80 an ounce.