Gold traded near its highest level in four months on Friday and looked set to post its best week in ten months, as investors sought safety from market volatility after Switzerland unexpectedly scrapped a cap on the franc.
Spot gold rose as much as 2.4 percent to its highest level since Sept. 8 at $1,260.30 an ounce in earlier trade and was up 2.3 percent at $1,257.46 an ounce on Thursday. US gold futures for delivery in February rose 2 percent to $1,259.40 an ounce, BRecorder said in a report.
“Gold is gaining from a risk-off situation because nobody expected the Swiss central bank not to keep that cap, and this has created potential big losses in many places and is obviously triggering some flight to safety,” Saxo Bank senior manager Ole Hansen said. US stocks fell, the benchmark 10-year US Treasury yield fell to around 1.8 percent and the dollar was down 0.1 percent against a basket of main currencies after the Swiss National Bank’s move, which is seen potentially preceding outright money-printing by the European Central Bank at its policy meeting next week.
“This is happening a week before the ECB meeting, which could add even further pressure to the euro more QE in the euro zone is a double-edge sword for gold in dollar-denominated terms but gold in euro terms should benefit,” Hansen said.
Gold has benefited from years of increased central bank liquidity following the 2008 financial crisis, but more monetary stimulus in the euro zone could result in a stronger dollar and in turn lower gold prices.
