Obama's softer tone on banks stimulates appetite for risk
Gold (GC-FT1,088.303.800.35%) firmed in Europe on Thursday as the U.S. dollar eased broadly after U.S. President Barack Obama softened his tone on bank restrictions in his State of the Union speech, lifting appetite for risk.
Platinum group metals outperformed other precious metals, with platinum (PL-FT1,508.3016.201.09%) rising nearly 1 per cent and palladium (PA-FT420.003.250.78%) 1.5 per cent. Platinum producers Lonmin and Aquarius announced lower quarterly output on Thursday.
Spot gold was bid at $1,090.80 (U.S.) an ounce at 1040 GMT, against $1,087.25 late in New York on Wednesday. U.S. gold futures for February delivery on the COMEX division of the New York Mercantile Exchange firmed $6.10 to $1,090.60.
Gold prices have declined some 4 per cent in the last two weeks as the dollar rallied against the euro, with fears over Greece's fiscal situation and waning risk appetite lifting the U.S. unit at the expense of higher-yielding currencies.
“The precious metals have been struggling with dollar strength so far,” said Saxo Bank senior manager Ole Hansen.
He said the Obama speech and expectations Federal Reserve chairman Ben Bernanke will be reappointed had helped dispel some risk aversion. “These things have removed some uncertainty, and that has helped the market to stabilize,” he said.
The dollar slipped from a six-month high versus the euro after Mr. Obama laid out plans to revive the U.S. economy and allayed market worries about moves to limit bank risk-taking in his comments.
Strength in the U.S. dollar curbs gold's appeal as an alternative asset and makes dollar-priced commodities more expensive for holders of other currencies.
Analysts said some investors bought back euros and other higher-yielding currencies sold last week when Mr. Obama's pledge to crack down on U.S. banks' risk-taking triggered risk aversion.
Appetite Recovers
Among other commodities, oil (CL-FT74.050.380.52%) rose towards $74 a barrel after Mr. Obama's speech and the Fed's decision to maintain low interest rates revived some confidence over economic growth.
Gold tends to track crude prices, as the metal can be bought as a hedge against oil-led inflation.
In production news, the China Gold Association said Chinese gold output jumped 11.34 per cent to a record 313.98 tonnes in 2009, securing the country's position as the world's largest producer of the yellow metal.
Silver (SI-FT16.640.201.22%) rose to $16.62 an ounce versus $16.54, tracking gold's gains. Holdings of the world's largest silver exchange-traded fund, the iShares Silver Trust, rose 0.5 per cent to 9,384.98 tonnes on Jan. 27, it said.
Platinum was at $1,516 an ounce against $1,502.50, while palladium was at $417 against $411.50.
Lonmin Plc, the world's number three platinum producer, said platinum sales fell 13.6 per cent in its first quarter as refined output of the metal declined.
Fifth-largest miner Aquarius Platinum also said its attributable output fell 14.8 per cent year-on-year.
Traders said while the figures were likely to underpin fears that production will be weak this year, their impact on prices would be limited. “Mining problems are already in the price, as everybody is expecting them,” said one PGMs trader.
A Reuters poll published on Wednesday showed platinum and palladium are expected to outperform other precious metals this year, with a new wave of investor demand boosting prices in anticipation of increased industrial use.
