Gold rose over 1 percent in volatile trade on Thursday as strong buying by exchange traded funds and safe-haven demand driven by ongoing unrest in Egypt triggered large buy orders. After trading lower in most of the morning session, gold rallied at midday in New York, just ahead of a speech by Federal Reserve Chairman Ben Bernanke and with financial markets already worried about escalating political tensions in Egypt and the Middle East.
"It's clearly driven by buy-stops the way the activity happened. I think it's ETF related," said Carlos Perez-Santalla, broker at New Jersey-based PVM Futures. Sizable volume of buy-orders from ETFs - which were sellers earlier - hit the market once gold prices rose to $1,345 an ounce, Perez-Santalla said.
Spot gold rose 1.3 percent to $1,353.55 an ounce at 1:18 pm EST (1818 GMT), after trading as low as $1,324.79. US gold futures for April delivery settled up $20.90, or 1.6 percent, at $1,353. Volume was in line with its 30-day moving average after notching lower than usual turnover in the past three sessions. Silver climbed 1.5 percent to $28.77 an ounce.
Both the No 1 iShares Silver Trust and the biggest gold ETF, the SPDR Gold Trust, saw hefty outflows in January, with iShares seeing its biggest ever one-month decline and the SPDR fund its second-largest such outflow. Gold was initially pressured by hawkish rhetoric from European Central Bank President Jean-Claude Trichet, who had raised expectations that the bank might move towards raising interest rates sooner rather than later.
"(Trichet) was indeed pulling a bit away from the rhetoric from a couple of weeks ago ... pushing out the timing of rate hikes and thereby also increasing the risk of inflation," said Ole Hansen, senior manager at Saxo Bank. Platinum inched 0.2 percent higher to $1,833.99 an ounce, while palladium gained 0.5 percent to $814.97.
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