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UPDATE: 20.30 BST. The price of gold surged $30 on Friday, capping a week of gains after the world’s central banks signalled the policy would remain loose for the near-term future.
An ounce of gold hit a high of $1,569.30, rising 2 per cent in the the biggest one-day percentage gain since December.
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Meanwhile, equities continued to see gains as well. The Eurofirst 300 was up 1.3 per cent and the S&P 500 index in New York was up 0.3 per cent to 1,363, the highest it has been since June 2008, just before the fall of Lehman Brothers.
Gains came against the backdrop of accelerating price growth in the US and Europe, as well as signs that growth could be slowing in key markets.
Asian shares retreated on Friday as weak US output growth fuelled uncertainty about the outlook for corporate earnings, though Japanese markets were closed. The Australian S&P/ASX 200 fell 1 per cent to 4,823.
Eurozone economy as inflation climbed to an annual level of 2.8 per cent in April from 2.7 per cent in March, while unemployment remained at 9.9 per cent across the economic bloc.
Germany’s fall in joblessness was countered by Spain’s jobless rate rising to 21.3 per cent in the first quarter, leaving about 5m people out of work. Meanwhile, Spain’s economic problems were compounded as data showed retail sales fell 8.6 per cent in March, down from a 4.3 per cent fall in February and the ninth consecutive month of decline.
In Spain, the Ibex index turned around early losses to stand 0.3 per cent higher at 10,898.3 as US futures pointed higher. The broader FTSE Eurofirst 300 index meanwhile, added 0.1 per cent to 1,154.13.
Meanwhile, prices of consumer goods accelerated in the US as well, though core measures of inflation remain subdued. Personal spending rose 0.6 month-over-month in March, versus 0.4 per cent in the previous month, it was reported on Friday.
In currency markets, the dollar continued its decline since Wednesday’s US Federal Reserve open market committee meeting, where the central bank committed to its ultra-low interest rates policy for “an extended period”.
The currency hit its lowest level in three years as a mixture of weaker-than-expected economic growth in the US and higher inflation also took their toll on confidence.
The dollar index hit a low of 72.83 on Friday, falling 0.3 per cent. The index measures the dollar’s progress against a basket of other major currencies.
That in turn has helped propel the surge in gold. “The Fed did not discuss any plans for raising rates or ending QE for a couple more meetings,” said Tom Pawlicki, energy and precious metals analyst at MF Global. “The dollar is flirting with three year lows, and that in turn re-energises the gold bulls.”
He also said that traders were talking about strong cash demand in Asia, a week ahead of the Akshaya Tritiya festival in India, typically a big driver of gold sales.
WTI crude oil, which trades as a physical hedge to the dollar as well as a proxy on growth, touched $114.18, surpassing the post-August 2008 high mark reached last week.
Though equities were rising, worries about growth are currently being expressed clearly in government bond market as investors pick up “safe havens” in markets where interest rates will remain low, namely the US and the UK – the Bank of England meets next week, and it is likely that the doves will carry the day, analysts say.
“We think that the BoE has in effect suspended its inflation target and is reluctant to raise rates in the face of a weak economy and serious fiscal austerity,” said Marc Chandler, global currency strategist at Brown Brothers Harriman.
Ten-year Treasuries are down 2 basis points to 3.29 per cent, and 10-year gilts are off 9bp to 3.48 per cent.
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