MW: Gold set to end losing streak on weaker dollar
Copper surges on hopes government plans will rescue financial markets
By Moming Zhou, MarketWatch
NEW YORK (MarketWatch) -- Gold futures rose Tuesday for the first time in four sessions as the U.S. dollar weakened, pushing dollar-denominated prices for the precious metal higher.
Meanwhile, the benchmark copper contract jumped more than 8%, rallying back past the $2.50-a-pound mark, on hopes that the latest U.S. government plan to directly inject capital into banks will rescue the ailing financial industry and in turn help spark economic growth.
The dollar's likely to fall as the government plans have the effect of applying upward pressure on inflation, analysts said.
Investors tend to buy gold as a hedge against inflation. Demand for the precious metal also tends to rise as the dollar weakens.
"The unintended consequence of the ongoing financial bailout will be a return of inflationary pressures to the commodity markets," wrote analyst Francisco Blanch at Merrill Lynch.
Gold for December delivery rose $3.70, or 0.4%, to $846.20 an ounce on the Comex division of the New York Mercantile Exchange.
In a research note released Monday, the analysts at Merrill predicted that gold prices will hit $1,500 an ounce and that oil will rise to $150 a barrel. They didn't specify when gold will hit the price target. Earlier Tuesday, the Treasury Department outlined a plan to inject $250 billion of the government's $700 billion rescue plan directly into U.S. banks. See full story.
he dollar was trading lower against the euro and the British pound. The dollar index which tracks the value of the greenback against a basket of other major currencies, lost 0.4%.
Gold's fallen in the past three sessions in reaction to lessening of safe-haven demand, according to James Moore, analyst at TheBullionDesk.com.
However, "the metal looks set to remain volatile in the coming session," he said, as investors watched the government's new rescue plan.
In other metals action to start the trading week, copper for December delivery surged 8.4% to $2.51 a pound, January platinum jumped 4.8% to $1,045 an ounce, December palladium gained 0.5% to $204.75 an ounce, and December silver rose 1.3% to $10.94 an ounce.
In spot trading, the London gold-fixing price -- used as a benchmark for gold for immediate delivery -- stood at $849.50 an ounce Tuesday morning local time, up $18 from Monday afternoon.
