LONDON, Oct 30: Gold rose almost 3 per cent to a one-week high on Thursday as a weaker dollar and rising oil prices boosted sentiment.

Spot gold was at $770.10/782.60 an ounce compared with $754.30 late in New York on Wednesday.

It’s surprising that the increase in gold wasn’t as pronounced as expected, said analyst Eugen Weinberg at Commerzbank, adding he had expected gold to climb above $800 on the dollar’s weakness.

The metal earlier rose to $776.30 an ounce, the highest since Oct. 21, and a 2.9 per cent gain on Wednesday’s close.

The US Federal Reserve cut interest rates by half a per centage point on Wednesday, sending the U.S. dollar tumbling.

Firmer equities also lifted gold and other precious metals, with silver and palladium rising to their highest in two weeks and platinum hitting a 1-week high.

Gold was also lifted by higher oil prices, which typically boosts the metal’s appeal as a hedge against inflation.

Gold, which traded around $800 earlier this month, was still well below a record high of $1,030.80 hit in March after a rally to a two-month high of $931 on Oct. 10, was met by heavy selling.

Precious metal sentiment received a much needed boost yesterday as the dollar retreated after the Fed’s rate cut, analyst Manqoba Madinane at Standard Bank said in a research note.

Gold is still down almost 12 per cent since the start of the month, on track for its biggest monthly decline since 1983, as an earlier rush for safe-haven assets gave way to a cross-commodity sell-off by investors scrambling for cash.

I think all the preconditions are there for gold to take a very healthy run. The physical demand for gold has actually exceeded the ability to supply right around the world, said Ian Smith, managing director of Newcrest Mining Ltd, Australia’s largest gold producer.

Silver tracked gold higher and was trading at $10.02/10.12, an ounce after rising almost 7 per cent to a high of $10.50 against Wednesday’s $9.82.Platinum was trading at $839.00/869.00 an ounce, after earlier hitting a high of $870.00 an ounce from $793.50.

Lonmin Plc, the world’s third-largest platinum producer, said the outlook for platinum prices remained challenging. Prices for platinum have fallen about 45 per cent so far this year.

Palladium was at $197.00/207.00 from $194.50.—Reuters