Other commodities such as oil have also extended gains on a brighter economic outlook, another reason fanning fears of medium- to long-term inflation, traders said.
Gold market reaction was muted to news that General Motors will file for bankruptcy protection on Monday, as traders said this had been widely anticipated.
Spot gold (XAU=) rose 0,7% to $985,00 per ounce from New York’s notional close of $978,20 on Friday, adding to a rise of more than $20 last week.
It earlier rose as high as $985,30, its highest since late February.
US gold futures for August delivery (GCQ9) gained 0,7% to a three-month high of $986,90 per ounce, from $980,30 an ounce on Friday’s settlement of the COMEX division of the New York Mercantile Exchange.
“Gold is rising because the dollar is weak, the economy is stabilising, and interest rates are low,” said Ronald Leung, director of Lee Cheong Gold Dealers in Hong Kong.
“There is too much hot money around as governments are printing money, and one option is to put that into stocks and the other is to gold,” he said, adding that it was just a matter of timing before gold prices rose above a key $1000 mark.
Gold rose to $1005,40 on February 20, its highest since a record peak of $1030,80 in March 2008.
The dollar edged up against the euro after dropping steeply on Friday. But the dollar hit a five-month low against a basket of major currencies (.DXY) as investors bought higher-yielding currencies and assets on hopes for a global economic recovery.
The dollar fell 0,1% against the yen. [USD/]
The dollar’s weakness has supported gold as investors view the metal as insurance against the falling value of dollar-denominated portfolios.
Speculators boosted their holdings of US gold futures, with noncommercial investors net long on 177308 contracts of gold futures in the week to May 26, compared with a net long 149584 contracts in the week to May 19.
