Gold prices on January 16th: Highest in 4 months

Gold prices rose 3% on January 16, 2015, to $1,266.11 per ounce, the highest since September 8, 2014, after the Swiss central bank unexpectedly removed the exchange rate ceiling.

Gold jewelry. (Image source: Internet)

On January 16th, the spot gold price on Kitco at 6:05 AM Vietnam time reached $1,263.5 per ounce, an increase compared to the closing price of $1,229.1 on January 14th.

At the start of the session, gold was trading at $1,231 per ounce, then declined slightly before reversing and rising steadily, reaching a peak of $1,265 per ounce at 1:30 PM. Towards the end of the session, gold was trading at $1,263.6 per ounce.

Gold futures for February delivery rose 2.5%, trading at $1,264.80 per ounce on the Comex exchange in New York, after touching $1,267.20, its highest level since September 8. Gold futures have gained for the fifth consecutive session, the longest winning streak since June 25.

The Swiss National Bank unexpectedly reversed its three-year policy, pushing the Swiss franc higher against the euro, a week before European policymakers convened to discuss their new stimulus package. The Bloomberg spot dollar index, which assesses the USD's value against 10 other major currencies, fell for a second day, which also boosted demand for gold as an alternative asset.

Immediately after this announcement by the SNB, the Swiss franc rose nearly 28% against the USD, while the euro fell 30% to a record low of 0.8500 francs/euro.

Ole Hansen, a senior manager at Saxo Bank, said the SNB's move, coming just a week before the European Central Bank (ECB) meeting, adds further pressure on the euro… increased quantitative easing (QE) in the eurozone is a double-edged sword for gold when priced in USD, but when priced in euro, gold will benefit.

Gold prices have benefited in recent years as central banks increased liquidity following the 2008 financial crisis, but increased monetary stimulus in the eurozone could push the USD higher, thus lowering gold prices.

Gold has risen 6.8% this year as signs of deflation and slowing global economic growth have fueled speculation that the Fed will slow down interest rate hikes in the US. Demand for the metal is expected to rebound in 2015 after two consecutive years of declines due to strong consumption in Asia and investors returning to gold trusts, according to HSBC Securities (USA) Inc.

Gold prices also rose 70% from December 2008 to June 2011 as the Fed bought debt and borrowing costs were kept near zero in an effort to revive economic growth. Fed Chair Janet Yellen stated that central banks were unlikely to raise interest rates before the end of April. Higher interest rates would reduce the attractiveness of gold because the metal typically yields returns only when its price increases.

In other metals markets, March silver futures rose 0.7%, trading at $17.102 per ounce on the Comex. March platinum futures gained 1.9%, closing at $1,262.80 per ounce on the New York Stock Exchange, its highest closing price since October 29. Meanwhile, March palladium futures fell 1.8%, closing at $766.35 per ounce.

According to Kinhte va Do Thi (Economy and Urban)