Gold enjoyed its biggest one-day gain in a month as traders scrambled to cover short positions following a temporary deal to avoid a historic US debt default.
The metal rallied 3.2 per cent to $1,322 a troy ounce and drew more support from a weak US dollar. The currency came under pressure after China’s Dagong downgraded its credit rating on the US.
Yesterday’s bounce is the latest in a series of volatile moves for the precious metal, caused by a string of unusually large trades. Liberum Capital reckons 2m ounces of gold has been dumped in the market over the past week as short sellers started to “test the water”. Analysts said some of those positions had been covered yesterday following the last-minute deal in the US Congress, suspending the debt ceiling until February.