Gold prices jump to 4-month high

Gold prices jumped to their highest level in nearly four months overnight as investors shrugged off worries about higher US interest rates and shifted focus to problems in Europe's bank sector.

Gold prices jumped to their highest level in nearly four months overnight as investors shrugged off worries about higher US interest rates and shifted focus to problems in Europe's bank sector.

The most actively traded contract, for August delivery, was recently up $US17.20, or 1.3%, at $US1,341.50 a troy ounce on the Comex division of the New York Mercantile Exchange. 

Gold prices had marched higher on Wednesday, after the US Federal Reserve announced it would end its bond-buying program by October, but reiterated its commitment to keeping interest rates low for an extended period. 

"That in itself shows that they're committed to a low-rate environment for the time being, and it's very supportive of gold," said Bob Haberkorn, a senior commodities broker with RJO Futures. 

Gold yields zero, and has an easier time competing for investor attention with interest-bearing investments like Treasury bonds when interest rates are low. 

On Thursday, gold futures extended those gains to touch an intraday high of $US1,346.80 an ounce, the highest traded price since March 19. 

Some investors also stocked up on gold to guard against emerging financial problems at a major Portuguese lender. Espirito Santo International, parent company of Portugal's Banco Espirito Santo, missed payments on short-term debt, investors learned Thursday. 

"It's a major bank and it raises worries about other potential issues at other banks in Europe," said Frank McGhee, head of precious metals with Integrated Brokerage Services in Chicago. 

Gold often attracts investors during periods of political or financial stress, as some buy the precious metal as an alternative to currency, while others view it as a better store of value than other assets. 

Silver prices followed gold's lead, with the September-delivery contract climbing US47.7c, or 2.3%, to $US21.545 a troy ounce on the Comex. 

Some investors buy silver as a cheaper alternative to gold, as other precious metals are considered currency alternatives and stores of value.

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