Gold Nears Highest Level in Almost 2 Weeks

Gold rose to the highest in almost two weeks on Wednesday after top central banks announced a co-ordinated move to avoid a global liquidity crunch, and the dollar fell.

Centrals banks from the world's leading economies, including the U.S. Federal Reserve and the European Central Bank, said they had agreed to lower the cost of existing dollar swap lines by 50 basis points, as well other measures.

Spot gold was up 1.8 percent at $1,746.59 per ounce at 1403 GMT, off a high of $1,746.80, its highest since Nov. 17.

Gold had reversed losses earlier after China moved to ease credit strains, by cutting the reserve requirement ratio for its commercial lenders for the first time in nearly three years.

Stocks and the euro moved higher, and the dollar fell sharply. A weaker dollar makes gold less expensive for holders of other currencies.

Data also showed U.S. private sector jobs increased in November, further fueling the market's appetite for risk.

"In the last couple of weeks gold has been behaving like a risky asset, and equities and commodities are up," Commerzbank analyst Daniel Briesemann said.

"We have seen that phenomenon since the last big gold price drop in September; there has been a very high correlation between equities and gold."

The precious metal is currently more positively correlated to the stock markets than it has been at any time in the last year.

Traditionally, gold has tended to benefit in times of economic or financial market uncertainty, because of the protection it can offer if inflation picks up and because of its immediate convertibility into hard currency.

Two years into Europe's sovereign debt crisis, investors are fleeing the euro zone bond market, European banks are dumping government debt, south European banks are bleeding deposits and a recession looms, fuelling doubts about the survival of the single currency.

"Europe is still looking like it's probably heading for a recession next year, and that issue is not going away," said David Wilson, director of metals research and strategy at Citi.

SKEPTICISM

"We still think there's an enormous amount of skepticism; that people don't think that Europe is going to deliver," said Rob Ryan, FX strategist at BNP Paribas in Singapore.

While euro zone ministers have agreed to ramp up the firepower of their rescue fund, they couldn't say by how much, and may turn to the IMF for more help as a leap in Italy's borrowing costs pushed the region closer to financial disaster.

U.S. gold GCcv1 rose 1.5 percent to $1,740.

Palladium rose more than 5 percent to a high of $622.50, and was $612.47 at 1354 GMT. Silver XAG was up 1.03 percent at $32.22, platinum up 0.9 percent at $1,545.24