NEW YORK/LONDON: Gold rose 3 percent on Thursday, erasing the previous day's loss, as investors awaited President Obama's speech on the US economy, after a dim outlook for the euro zone from the European Central Bank.
Obama will address Congress at 7:00 p.m. (2300 GMT) on an estimated $300 billion plan to spur job creation. Gold will be trading in Friday's Asian session at that time.
"I'd be interested to see how the President's speech outlines another $300 billion in stimulus to boost the economy, all of which will be bullish for gold," said Sean McGillivray, head of asset allocation at Great Pacific Wealth Management in Grants Pass, Oregon.
"The fundamentals are in place for gold as a safe-haven, but expect a lot of volatility as it is a very small market compared to US Treasuries, and there's so much attention on it now, so market swings will be the norm."
Obama will make tax cuts for middle-class households and businesses the centerpiece of his stimulus plan and press for new spending to repair roads, bridges and other deteriorating infrastructure. He had pushed through a bigger $800 billion stimulus package in 2009.
Earlier on Thursday, Federal Reserve Chairman Ben Bernanke, also pledged to boost growth and fight joblessness but offered no details.
Both bullion and US futures of gold closed down 3 percent on Wednesday as investors sold the precious metal and bought stocks after a German court ruling that was seen aiding Berlin's participation in euro zone bailouts.
"In the medium term to long term, it's pretty clear that the bullish trend hasn't been tarnished a bit," said Pradeep Unni, senior analyst for gold at Richcomm Global Services in Dubai. "We take yesterday's slide as a correction which is good for the overall bullish market."
In Thursday's session in Asia, gold finished sharply higher as traders expected more physical demand for bullion from Wednesday's price drop. Demand anticipated ahead of the wedding season in India -- a time when jewelry buying peaks -- also boosted prices.
Gains in gold accelerated during the European session after the ECB signaled a halt in interest rate hikes in the euro zone, driving the euro lower. ECB President Jean-Claude Trichet said he expected "particularly high uncertainty and intensified downside risks" to the region's growth.
By 3:20 p.m. (1920 GMT) in New York, spot gold, which tracks trades in bullion, was up about $54 or 3 percent at near $1,870 an ounce.
US gold futures for December delivery also jumped more than $50 or 3 percent to above $1,873 an ounce in post-settlement trade, after finishing the official session up 2.2 percent at $1,857.50.
Reuters data showed gold prices have moved by more than $50 only 16 times in the past 40 years with seven of those moves occurring in the past month alone.
For the year thus far, both the spot and futures prices have risen more than 30 percent, heading closer to the $2,000 per ounce target long anticipated by gold bulls.
Swiss bank UBS raised its forecast for the average price of gold to $2,075 an ounce from an earlier $1,380. It also boosted its 2011 price view to $1,665 from $1,500 previously.
"At this point in time, there is nothing else that can act as a safe haven," said Afshin Nabavi, head of trading at MKS Finance in London. "Buy gold or just keep your cash under the mattress. Those are the only real (safe-haven) options."
Copyright Reuters, 2011
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