Gold rose more than 1 per cent on Tuesday to its highest since early September, as uncertainty about how extensive a stimulus programme the European Central Bank will announce on Thursday drove investors into less risky assets.
Buying accelerated on a break of the previous day’s high, dealers said, as stops were triggered, taking the metal to a session high of $1,294.10 an ounce.
Spot gold was up 1.2 per cent at $1,292.20 at 1019 GMT, while US gold futures for February delivery were up $16 an ounce at $1,292.90.
Nervous financial markets are focused on Thursday’s ECB meeting, at which the bank is widely expected to unveil a quantitative easing programme, and a Greek election on Sunday, which polls suggest anti-bailout party Syriza will win.
Gold posted its best week since mid-August last week as risk aversion was stoked by the Swiss National Bank's decision to scrap the franc’s peg against the euro.
That led to a rise in investment in gold exchange-traded products (ETPs), which issue securities backed by physical metal. The world’s largest gold exchange-traded fund saw its biggest one-week inflow in 2-1/2 years last week.
“Since the SNB announcement, both gold and silver have reconnected with ETP investors, and ahead of major risk events such as ECB and the Greek election, buying interest has been on the rise,’’ Saxo Bank's head of commodities research Ole Hansen said.
“Gold is maintaining its premium over platinum, which also indicates that some safe-haven plays are being initiated. The current focus has moved from deflation and the rising dollar to market risk and negative interest rates.’’
Growth forecasts
Growing worries over the global economy also added to gold’s appeal as a safe store of value.
The International Monetary Fund on Tuesday cut its global growth forecast for 2015, and urged governments and central banks to pursue accommodative monetary policies and structural reforms.
In a rare glint of brightness, China reported its economy had not slowed as much as many had feared. That helped lift stock markets in Europe and buoy the dollar.
Among other precious metals, silver was up 1.5 per cent at $17.91 an ounce, platinum was up 0.5 per cent at $1,263.99 an ounce and palladium was up 1.2 per cent at $762.60 an ounce.
Platinum’s discount to gold reached nearly $30 an ounce on Tuesday, its largest since April 2013.