Gold rises on Spain's strict austerity program

Associated Press

The price of gold surged Thursday after Spain unveiled a program of spending cuts and tax hikes that raised expectations it soon could ask for financial help from its neighbors.

Separately, more negative news in China renewed hopes that the central bank there will take more action to help its economy, similar to programs announced recently by the U.S. and Europe.

Gold for December delivery increased $26.90 to finish Thursday at $1,780.50 an ounce.

The price of gold has risen 13.6 percent this year on hopes that authorities in the U.S., Europe and China would help their economies which, in turn, would boost the global economy. Traders often buy gold as a hedge against inflation.

Spain's program is designed to prove it is on track to meet deficit-reduction targets. The country has been under pressure to ask for financial help from the European Central Bank, which is pushing to resolve the region's three-year-old debt crisis.

Many believe the program is a step toward Spain asking for bailout money from the ECB, said George Gero, a vice president at RBC Global Futures.

In China, the country's biggest steelmaker shut down a mill because of mounting losses at the facility and weak demand. And the government said total profits for China's biggest industrial companies fell for a fifth month in August.

"If you put together stimulus on three continents ... that's a good inflationary outlook," Gero said.

Other metals also finished higher. In December contracts, silver increased 72.6 cents, or 2.1 percent, to end at $34.666 per ounce, copper rose 3.4 cents to $3.744 per pound and palladium gained $9.55 to $635.40 per ounce. October platinum rose $11.50 to end at $1,645.90 an ounce.

In other trading, benchmark oil increased $1.87, or 2.1 percent, to finish at $91.85 per barrel, heating oil gained 5.05 cents to $3.1573 per gallon, wholesale gasoline increased 6.32 cents, or 2.1 percent, to $3.1443 per gallon and natural gas rose 8.2 cents, or 2.6 percent, to $3.297 per gallon.

December wheat fell 13.75 cents to end at $8.555 per bushel, December corn dropped 8.5 cents to $7.1625 per bushel and November soybeans decreased 2.25 cents to $15.7075 per bushel.

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AP writers Ciaran Giles and Joe McDonald contributed to this report.

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