Gold extends rally after best day since 2008

SINGAPORE – Gold prices climbed more than 2 per cent on Feb 4, building on their best day since 2008 in the previous session, as bargain-hunting and a softer US dollar supported bullion.

Spot gold was up 2.2 per cent at US$5,044.74 per ounce as at 9.12am, after gaining 5.9 per cent on Feb 3, its biggest daily gain since November 2008. Bullion scaled a record high of US$5,594.82 on Jan 29.

The dollar fell against most major currencies except the yen on Feb 3 as traders consolidated recent gains, fuelled by upbeat US data and expectations of a less-dovish Federal Reserve following US President Donald Trump’s nomination of Mr Kevin Warsh as its next chair. A weaker dollar makes greenback-priced bullion more affordable for holders of other currencies.

“Forced sales have likely run their course in precious metals,” Mr Daniel Ghali, a senior commodity strategist at TD Securities, said in a note. “The intense volatility over the last week could certainly keep retail participants on the sidelines, removing an increasingly important cohort of buyers.”

Precious metals soared in January, underpinned by speculative momentum, geopolitical upheaval and concerns about the Fed’s independence. But market watchers warned that the advances had been too large and too swift. The rally came to a sudden halt at the end of last week, with silver seeing its biggest daily drop on record and gold plunging the most since 2013.

Volatility in precious metals will remain elevated, according to Bank of America.

Gold has a stronger, longer-term investment thesis than silver, said Mr Niklas Westermark, head of Europe, the Middle East and Africa commodities trading at Bank of America. While inflated prices and market turmoil may affect position sizing, they will not dampen overall investor interest, he said.

Many banks have backed gold to recover, with Deutsche Bank saying on Feb 2 that it was standing by its forecast for bullion to rally to US$6,000 an ounce. REUTERS, BLOOMBERG