MW: Gold rises 1% on speculation prices have bottomed
By Moming Zhou, MarketWatch
NEW YORK (MarketWatch) -- Gold futures rose Monday for the first time in three sessions, adding 1% on speculation that the precious metal's prices, after suffering their biggest monthly loss in October, may have bottomed.
Gold for December delivery gained $7.30 to stand at $725.50 an ounce on the Comex division of the New York Mercantile Exchange. The contract had surged to $739.50 earlier.
The precious metal lost fully 18% in October, the biggest monthly percentage decline since February 1983, according to Comex data.
Gold's losses last month mainly stemmed from a strengthening U.S. dollar, fund liquidations, and worries that the financial crisis may have pushed the world economy into deflation, analysts said.
The dollar, however, has fallen off its highs in the past few sessions. The U.S. currency was trading lower against the euro on Monday.
"The reversal in the dollar's recent strength could signify that [gold prices] are close to lows," said Mark O'Byrne, executive director at Gold & Silver Investments. Also, "the performance of the precious metal mining shares may be an indication that we are at or near a low in this sell-off."
On the equities side, the Amex Gold Bugs Index which tracks the share prices of major gold companies, jumped 15% last week, the first weekly gain in five weeks. The PHLX Gold & Silver Sector Index rose 14%, gaining for first week in six.
Among the companies that are components of both indexes, shares of Barrick Gold Corp. , the world's largest gold miner, rose 14% last week, while Goldcorp Inc.rose 9.7%.
These indexes "tend to be a leading indicator of a trend reversal in the precious metals," noted O'Byrne.
In other early metals trading, December copper fell 1.6% to $1.80 a pound. Copper lost 35% last month.
December silver was flat at $9.73 an ounce. Silver surrendered 20% last month.
December palladium rose slightly to stand at $199.60 an ounce, while January platinum fell 0.2% to $830 an ounce.
Deflation worries
Some analysts say gold remains susceptible to downward pressures as worries about deflation increased.
Although major central banks in the world repeatedly pumped money into the financial system, the credit crunch has been slow to sign many signs of fading. That means while the amount of money is increasing, velocity, or money turnover, is declining, analysts said.
Gold prices tend to move up in the face of inflation. When prices are falling and economic activities are shrinking, gold prices move lower.
In gold spot trading, the London gold-fixing price -- used as a benchmark for gold for immediate delivery -- stood at $734 an ounce Monday morning local time, up $3.25 from Friday afternoon.
Gold in the SPDR Gold Trust , the largest gold exchange-traded fund, remained at 749.21 tons Friday, unchanged from Thursday, according to the latest data from the fund. Gold held by the fund hit a record high of 770.64 tons on Oct. 10.
