The price of gold surged yesterday after Spain unveiled a programme of spending cuts and tax hikes that raised expectations it soon could ask for financial help from its neighbours. Separately, more negative news in China renewed hopes that the central bank there will take more action to help its economy, similar to programmes announced recently by the US and Europe. Gold for December delivery increased US$26.90 to finish yesterday at US$1,780.50 an ounce. The price of gold has risen 13.6 per cent this year on hopes that authorities in the US, Europe and China would help their economies which, in turn, would boost the global economy. Traders often buy gold as a hedge against inflation. Spain’s programme is designed to prove it is on track to meet deficit-reduction targets. The country has been under pressure to ask for financial help from the European Central Bank, which is pushing to resolve the region’s three-year-old debt crisis. Many believe the programme is a step toward Spain asking for bailout money from the ECB, said George Gero, a vice president at RBC Global Futures.
In China, the country’s biggest steelmaker shut down a mill because of mounting losses at the facility and weak demand. And the government said total profits for China’s biggest industrial companies fell for a fifth month in August. “If you put together stimulus on three continents ... that’s a good inflationary outlook,” Gero said. Other metals also finished higher. In December contracts, silver increased 72.6 cents, or 2.1 per cent, to end at US$34.666 per ounce, copper rose 3.4 cents to US$3.744 per pound and palladium gained US$9.55 to US$635.40 per ounce. October platinum rose US$11.50 to end at US$1,645.90 an ounce. In other trading, benchmark oil increased US$1.87, or 2.1 per cent, to finish at US$91.85 per barrel, heating oil gained 5.05 cents to US$3.1573 per gallon, wholesale gasoline increased 6.32 cents, or 2.1 per cent, to US$3.1443 per gallon and natural gas rose 8.2 cents, or 2.6 per cent, to US$3.297 per gallon. December wheat fell 13.75 cents to end at US$8.555 per bushel, December corn dropped 8.5 cents to US$7.1625 per bushel and November soybeans decreased 2.25 cents to US$15.7075 per bushel.
AP writers Ciaran Giles and Joe McDonald contributed to this report.