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
"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.