Gold and platinum hit historic highs for a fourth straight day on Wednesday and silver rallied to its highest in 27 years on US interest rate cuts and fears about output in South Africa. But gold’s rally had been annoying for the physical market, with jewellers complaining that high prices were turning away consumers. Gold rose as high as $937 an ounce on Wednesday, driven by technical buying ahead of US Federal Reserve meeting on interest rates. The world’s third biggest gold producer Anglogold and other top gold mines Gold Fields and Harmony had stopped mining due to power shortages in the country. Besides the said production problem, Fed rate cut of 0.5 percentage point at the end of policy meeting on Wednesday after last week’s 75 basis points cut, also underpinned the prices in precious markets. Analysts said sentiment was bullish, with gold already rising 11 percent in 2008, after a jump of 32 percent last year, as investors bought the metal on uncertainty in the dollar’s outlook, record high crude oil and turmoil in financial markets.
The Fed cut, which has weakened the dollar also helped oil prices increase up to nearly $93 while forecasts for a draw in US distillate stocks. Expectations for OPEC to maintain output levels when it meets on Friday in Vienna despite consumer nation calls for more oil to bring down prices, also supported the market. Crude oil futures fell more than a dollar on fears more losses in the US financial sector will continue to weaken the economy of the world’s largest oil consumer. Oil fell below $91 a barrel on Friday, ahead of an OPEC meeting later in the day, as weak US economic data deepened fears the world’s top energy consumer was sliding into a recession.
Two rounds of aggressive cuts in interest rates by the US Federal Reserve in nine days and expectations of more to come have weighed on the dollar. US growth lower in the fourth quarter and was the weakest in five years for all of 2007. Gross domestic product (GDP), which measures total goods and services output within US borders, decreased weaker than expected 0.6 percent annual rate in the fourth quarter and for the full year advanced only 2.2 percent – the slowest growth in annual GDP since 1.6 percent in 2002. Consumer spending, more than two – thirds of US growth, held up well in the fourth quarter, growing at 2 percent annual rate compared with 2.8 percent in the third quarter. But growth in consumer spending for the full year 2007 was the softest since 2003, a further indication that weakening housing prices.
The dollar hit an all – time low versus the Swiss franc on Thursday after the Federal Reserve cut interest rates and it has also struggled versus the yen after the Fed slashed the benchmark fed funds rate a half percentage point to 3.00 percent, following last week’s three – quarter percentage point rate cut. ECB officials remained silent in terms of FED decisions and the euro was little changed at nearly $1.4900.
