Gold surged 2.5 percent on Friday, bouncing $40 per ounce off session lows as fears that unrest in Egypt will spread across the Middle East prompted investors to buy the precious metal as a safe haven. Egypt's president Hosni Mubarak imposed a curfew and ordered troops to back up police as they struggled to control crowds who flooded the streets of Cairo and other Egyptian cities on Friday to demand that he step down.
"All things Egypt. There is a major flight to quality...a stronger dollar, and flight into bonds, flight into gold," said Frank McGhee, head precious metals trader of Integrated Brokerage Services in Chicago. Investors often turn to gold as an insurance at the expense of paper currencies during times of political and economic uncertainties.
Spot gold rose 2.3 percent to $1,343.01 an ounce by 11:58 pm EST (1658 GMT), the largest one-day gain in nearly 3 months. US gold futures for February delivery rose $24.7 to $1,343.10 an ounce. The metal had touched a four-month low of $1,308.00 an ounce, having fallen 2.6 percent on Thursday on a run of firmer than expected US economic data which boosted confidence in the recovery.
Gold initially weakened after data showed the US economy gathered speed in the fourth quarter with the biggest gain in consumer spending in more than four years. "Though the GDP data came in slightly below expectations... (its acceleration) was driven by two factors which are very important when looking forward, and that is the more important factor in assessing the future course of the US economy," said Quantitative Commodity Research consultant Peter Fertig.
Investment demand for gold has been soft this year, with holdings of the SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, down another 3 tonnes on Thursday. Spot silver rose 3.9 percent to $27.92 an ounce. Holdings of the world's largest silver-backed ETF, the iShares Silver Trust, fell to 10,426.43 tonnes on Thursday from 10,447.70 tonnes. Platinum climbed 1.1 percent to $1,800.99 an ounce and palladium gained 1.5 percent to $814.47.
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