Gold Prices Soar Above $1200

Investors were spooked on Wednesday pushing precious metals to rally late in the session as US stocks crashed. Gold soared above the 1200 price level to 1208. In the Asian session traders booked profits as gold gave back $5 to trade at 1203.20. Silver dipped 131 points to 16.928 and platinum dipped $1.50 to 1163.00. Gold prices are forecast to bottom out in 2015 after a two-year slide as the expected start of the Federal Reserve’s rate-raising cycle removes a key event risk from the market, consultancy Metals Focus said in a report on Tuesday. Better prospects for gold sales in Asia, lower selling from Western investors, and a retreat in mine supply from record highs are likely to play into a stable market this year.

Gold rallied two per cent to a one-month high as the US dollar retreated after a downbeat jobs report from ADP raised expectations that the Federal Reserve could be more cautious in tightening monetary policy.

The US dollar fell 0.2 per cent against a basket of currencies, after weaker-than-expected ADP private jobs data raised concerns that Friday’s impending jobs report could also point to worsening conditions in the labour market. A strong reading from the US jobs data on Friday could boost bets the Federal Reserve will hike interest rates sooner rather than later, lifting the opportunity cost of holding non-yielding gold. However, a worse-than-expected report could support views that the Fed will hold off any rate hike until next year.

Gold is particularly sensitive to shifts in US interest rates, which also move the US dollar, in which the metal is priced.

In other metals copper gained 2 points to trade at 2.749 well below its range in March while palladium added $1 as increases in auto sales helps support the base metal. Copper prices steadied on Wednesday after Chinese factory activity performed a fraction better than expected, while nickel plumbed new six-year lows as China nickel pig iron producers sold stocks to raise cash. Activity in China’s factory sector unexpectedly picked up in March but remained weak. The stocks carry short positions on the London Metal Exchange or Shanghai Futures Exchange as lenders hedge against them, putting pressure on the prices.