[miningmx.com] — GOLD ticked higher on Wednesday, hovering near a lifetime high around $1,778 an ounce struck in the previous session, but further gains could be capped by a rebound in equities after the US Federal Reserve’s vow to keep rates near zero.
Stocks bounced in Asia after US shares jumped on the Federal Reserve’s unprecedented pledge to keep interest rates near zero for at least two years, although the move confirmed fears the US economy will remain weak for far longer than previously forecast.
Gold added $13.09 to $1,756.49 during early morning trade, having hit a record at $1,778.29 on Tuesday, in its biggest three-day rally since the financial crisis in late 2008 after equities plunged on fears over the threat to economic growth from the US and euro debt crises.
“Generally speaking, the panic is subsiding for the moment. I would expect that (gold) will consolidate at these levels for a while before we get any sort of clear idea of the sort of next major moves,” said Citigroup analyst David Thurtell.
“I think there are enough concerns about sovereign debts and weakening growth, that people will buy dips, so it should remain supported.”
US December gold futures rose $16.3 to $1,759.3 an ounce, within sight of Tuesday’s record of about $1,782 an ounce.
Tracking strong global prices, the most active gold contract on the Tokyo Commodity Exchange, June 2012, hit a record for a second consecutive day at 4,408 yen a gram.
The Fed pledged to hold benchmark rates at rock-bottom lows until mid-2013, and opened the door to other tools to support growth, saying that US economic growth was proving considerably weaker than expected.
Global stock markets had been tumbling since the start of August on fears the United States would slide back into recession after a downgrade of the US credit rating on Friday, and on the ever-expanding euro zone debt crisis.
MSCI’s all-country world stock index was about 17% below its May peak on Wednesday, after slipping as far as 20%, the generally accepted definition
of a bear market, on Tuesday.
“We’ll wait and see if stocks markets will continue to stabilise, because if they will, then gold will drop down a bit,” said a physical dealer in Hong Kong.
“But I think there’s no change in sentiment for gold. Interest rates in the US will be kept low in the next two years and it should benefit gold for the time being.”
Premiums for gold bars remained steady in Singapore and Hong Kong, while dealers in Tokyo were offering excess gold bars to trading houses in Southeast Asia after record bullion prices triggered selling in Japan.
Gold bars were quoted at a discount of 25 cents in Tokyo.
“The general public has been selling back their gold, so that’s why we are offering gold bars not only to Singapore, but also to other countries in Southeast Asia,” said a physical dealer in Tokyo.
