Gold rose to within a whisker of its all-time high Wednesday, as record low U.S. new home sales stirred talk of extended central banks’ accommodative policies, and a possible collapse of Portugal’s government rekindled euro zone debt worries.
Bullion rose 0.6% to just short of its record US$1,444.40 an ounce set on March 7, rebounding over 4% in the last eight sessions amid safe-haven buying and ongoing Western air strikes on Libya.
Political unrest in other Arab countries also underpinned gold as Yemen’s president offered to step down by year end to appease mounting demands for his resignation.
Spot gold rose 0.6% to US$1,437.55 an ounce by 2:29 p.m. EDT (1829 GMT).
Gold accelerated gains to hit a session high of US$1,440.90, its highest since March 7, after data showed the U.S. housing market slide was deepening as new home prices fell to their weakest since 2003.
U.S. April futures settled up 0.7% at US$1,438 an ounce.
“The new home sales data inspired some to think that we may not see the demise of QE2, and we are going to see money printing continue past its potential expiration at the end of June,” said Mark Luschini, chief investment strategist of broker-dealer Janney Montgomery Scott with US$53-billion assets under management.
The Federal Reserve’s improved view of the U.S. recovery and heightened vigilance on inflation had suggested it will wrap up its monetary easing once it completes its US$600-billion bond buying program — dubbed QE2 because it is the second round of quantitative easing — at mid-year.
“That would likely mean more stimuli and more prospect for inflation, and that’s gold friendly,” Luschini said.
While commodity markets were mostly quiet on Wednesday, gold was one of the most actively trading markets with volume approaching 140,000 contracts at midday.
Spot silver soared to a 31-year peak of US$37 an ounce, surpassing its previous high set two weeks ago. It later gained 2.3% to $37.17 an ounce.
Year to date, silver has gained over 20%, and gold was up just over 1%. Silver was boosted by near-term supply tightness and strong industrial demand on expectations the global economy continued to recover.
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