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Gold ends volatile week at $1,746

Published: 12:29 13 Aug 2011 BST

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Gold rose sharply this week, setting a new all time high at US$US$1,817 per ounce as traders bought the yellow metal to protect wealth amid increased volatility in the markets. The yellow metal retreated late in the week as margin requirements rose, while safe haven demand fell in the wake of positive US data.

Stock markets indexes in Europe and the US were going back and forth this week with the Dow Jones index moving more than 400 points for four straight sessions for the first time ever, posting its biggest daily loss since 2008 and biggest daily gain since 2009 along the way.

Traders were spooked by last week’s downgrade of the US debt rating from AAA to AA-plus by Standard & Poor’s.

However, the markets switched to buying mode after Tuesday’s meeting of the Federal Reserve. The Fed pledged to keep interest rates at near zero until mid-2013 to stimulate the ongoing recovery.

The statements triggered a relief rally, but that did not last as traders started selling again amid speculation that France could lose its AAA rating due to the exposure of its banking sector to Greek bonds.

The rumours prompted agencies Standard & Poor’s, Moody’s and Fitch to reaffirm their ratings for France.

Gold fell sharply at the end of the week after US jobs and retail sales data beat expectations, while CME Group, which operates the world’s largest commodity exchange, decided to raise margin requirements for gold futures.

Gold ended the week at US$1,746/oz. Silver rallied 43 cents to US$39.07/oz and platinum advanced US$5 to US$1,792/oz.

Gold miners did well this week. Randgold Resources (LON:RRS) climbed from 6,145 pence to 6,170 pence over the past five days of trading, while FTSE 250 constituent African Barrick Gold (LON:ABG) surged from 472 pence to 527 pence.

Platinum miner Lonmin (LON:LMI) followed, rising from 1,103 pence to 1,166 pence.

Silver producer Fresnillo (LON:FRES) moved in the opposite direction, dropping from 1,800 pence to 1,725 pence.

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