Gold prices post biggest 1-day gain ever Wednesday September
17, 6:53 pm ET
By Stevenson Jacobs, AP Business Writer
Gold makes biggest 1-day
gain ever as investors flock to safe-haven assets
NEW YORK (AP) -- Gold prices
exploded Wednesday -- posting the biggest one-day gain ever
in dollar terms -- 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.
The huge rally came after the government moved
overnight to rescue troubled insurer American International
Group Inc. with an $85 million bailout loan. The Federal Reserve
stepped in after AIG, teetering on collapse from losses tied
to the subprime crisis and the credit crisis, failed to find
adequate capital in the private sector.
The emergency measure came a day after Lehman
Brothers Holdings Inc., a 158-year-old investment bank, filed
for bankruptcy after failing to find a buyer.
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, analyst with Kitco Bullion Dealers
Montreal, said buying accelerated as rumors spread across
trading floors that another financial firm 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 boosted gold prices.
A falling greenback encourages investors to shift funds into
hard assets like 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 tme in March, boosted 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
loses momentum.
"The same market participants who got
out of gold are coming back in now. This is the start of an
upward move," said Carlos Sanchez, analyst with CPM Group
in New York, who predicted prices could climb back to $1,000
by year's end.
Silver prices also jumped. The December contract
soared $1.158 to settle at $11.675 an ounce. December copper,
however, fell 4.65 cents to settle at $3.0425 a pound.
Wednesday's gold rally lifted virtually every
other commodity, with crude oil, corn, wheat and soybeans
all trading higher.
