LONDON, Jan 15 (Reuters) – Gold rose more than two percent to a 4-month high on Thursday as European shares and the dollar turned lower after a shock move by Switzerland to abandon its three-year cap on the franc sent Europe’s shares and bond yields tumbling.
Spot gold rose as much as 2.4 percent to its highest level since Sept. at $1,260.30 an ounce in earlier trade and was up 2.2 percent at $1,256.61 an ounce by 1125 GMT. U.S. gold futures for delivery in February rose 1.8 percent to $1,257.10 an ounce.
“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.
European stocks plunged and the dollar fell 0.4 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’s liquidity over the years 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.
Euro-denominated gold rose to a fresh peak of 1,077.09 euros an ounce, its highest since May 2013.
For the rest of this article, click here: http://www.reuters.com/article/2015/01/15/markets-precious-idUSL3N0UU3OB20150115