Crude futures in New York rose as much as 3.8%, rebounding from a five-year low. Gold earlier fell to a three-week low after Swiss voters rejected a measure that would’ve required their central bank to hold a portion of its assets in bullion. Prices erased this year’s losses as Moody’s Investors Service cut Japan’s credit rating and U.S. holiday spending slowed, fueling concern that global growth will falter.
Bullion dropped to the lowest since 2010 last month, partly on waning demand for a hedge against inflation. Federal Reserve officials have warned that lower energy prices could hold down consumer costs in the near term. Oil’s advance today is the first gain in more than a week.
“What’s driving the gold market here is crude,” Tai Wong, the director of commodity products trading at BMO Capital Markets Corp. in New York, said in a telephone interview. “The move is snowballing as recent short covering and micro-term momentum buyers go long.”
On the Comex, gold futures for February delivery jumped 2.5% to $1,204.40 an ounce at 12:34 p.m. in New York, headed for the biggest gain since June 19. A close at that level would leave the metal up 0.2% this year. On Nov. 28, the price settled with a 2.2% loss in 2014.
The metal extended gains after prices traded “far enough above $1,180” to signal a “key reversal day,” Wong said. Gold broke the $1,180 support in November, after rebounding when it traded near the level in the previous 16 months.
Trading was more than double the 100-day average for this time of day, data compiled by Bloomberg show.
The downgrade for Japan and slower U.S. retail sales “suggest lower interest rates and a flight to quality, and that’s good for alternative assets like gold and silver,” Mike McGlone, the research director at ETF Securities U.S. in New York, said in a telephone interview.
Prices have rebounded 6.5% since touching $1,130.40 on Nov. 7, the lowest since 2010. Central banks in Europe and Japan are trying to revive weakening economies with more stimulus, reviving demand for precious metals amid increasing money supplies.
While spot gold quoted in dollars is little changed for the year, bullion denominated in euros has climbed 10% and in yen 13%.
Silver futures for March delivery jumped 5.9% to $16.475 an ounce on the Comex, on pace for the largest advance since September 2013. Prices rose as much as 6.1%.
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