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Gold prices shoot-up $90 in one day

Gold shoots up $90.40 on financial-market jitters

Winston-Salem Journal
September 18, 2008

Gold prices posted the biggest one-day gain ever in dollar terms yesterday as fears of more credit-market turmoil unnerved investors and triggered a flood of safe-haven buying.

Gold for December delivery rose as much as $90.40, or 11.6 percent, to $870.90 an ounce in after-hours trading on the New York Mercantile Exchange after jumping $70 to settle at $850.50 in the regular session. That was the biggest one-day price jump ever. Gold’s previous single-day record was a $64 gain on Jan. 29, 1980. In percentage terms, it was gold’s largest one-day advance since 1999.

Fearing more tightening of credit markets, investors reacted swiftly and began dumping stocks and socking money into gold, silver and other safe-haven commodities. Gold is especially attractive during times of crisis because the metal is known for holding its value.

Jon Nadler, an analyst with Kitco Bullion Dealers Montreal, said that buying accelerated as rumors spread across trading floors that another financial company may be in trouble. “The psychology right now has everyone asking, ‘Who’s next?,'” Nadler said. “If another big bank falls, we could see an implosion, and that has people very worried.”

A weaker dollar also drove up gold prices. A falling dollar encourages investors to shift money into hard assets, such as gold, and other commodities that are bought as hedges against inflation and weakness in the U.S. currency.

Gold rocketed above $1,000 an ounce for the first time in March, helped by record oil prices, a weak dollar and worries that the U.S. economy was sliding into a recession. It has since pulled back sharply as a global commodities boom lost momentum.

 


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