September 6, 2012

Gold Up on ECB Hopes

Platinum rises on mine disruptions; other metals increase

For the first time since March, the price of gold rose above $1,700 per ounce on hopes that the European Central Bank (ECB) would announce a plan for unlimited purchase of sovereign bonds as a means of combating the financial crisis.

Platinum was up for a fifth straight day in European trading, as problems continued at South African platinum mines, and other metals rose as well.

Bloomberg reported Thursday that optimism over ECB President Mario Draghi’s bond-buying plan led to the boost in the price of gold, which generally trades at an inverse to the U.S. dollar. The euro was up against the dollar as well, trading near a two-month high.

In early morning European trading, spot gold gained 1% to hit $1,709.90; the last time the metal came in above $1,700 for immediate delivery was back in March. December-delivery gold was up as well on the New York Comex, gaining 1.1% to reach $1,712.10.

“The market is optimistic about the ECB’s plan to rescue the region,” said Wang Xiaoli in the report. Xiaoli, chief investment strategist at CITICS Futures Co., a unit of China’s largest listed brokerage, added, “Gold is getting a lift from the strength in the euro.”

Demand for platinum, meanwhile, has been steadily rising as disruptions continue at platinum mines in South Africa. World prices for the metal have risen along with demand, and have seen an increase of more than 2% since the mine disruptions began.

Strikes and the shooting by police of 34 miners in recent days have caused the largest supply interruption in seven years. That sent investors scurrying, at the fastest rate since 2010, to secure stores of the metal, which is used not just for jewelry but also for catalytic converters.

South Africa is the source of 80% of the platinum known to exist. It also is the fourth largest producer of gold in the world. Should the unrest spread from the platinum mines to gold operations, investors could be in for a challenging time.

Spot silver and palladium also saw increases, with silver adding as much as 2.3% in early trading to $32.995 an ounce, the highest it’s been since April 3, before dropping back a bit to $32.895. Palladium recorded a more modest increase of 0.2%.

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