Forexpros – Gold and silver futures extended strong gains on Tuesday, as the U.S. dollar weakened amid hopes that euro zone policy makers will act to provide a solution to the region’s ongoing debt crisis, while some bargain buying also lent support.
On the Comex division of the New York Mercantile Exchange, gold futures for October delivery traded at USD1,658.05 a troy ounce during U.S. morning trade, soaring 4.08%, on track for its biggest one-day gain since March 2009.
It earlier rose as much as 4.9% to trade at USD1,676.95 a troy ounce, the highest price September 23.
Earlier in the day, German Chancellor Angela Merkel stressed the importance of approving changes to the European Financial Stability Facility, the region’s bailout fund.
Merkel’s comments added to speculation that euro zone leaders are examining ways to enlarge the capacity of the EFSF ahead of votes in several European states later in the week on increasing the role of the rescue fund.
The measures have to be passed by all of the currency bloc's governments before steps to expand its role can be implemented.
The euro strengthened against the U.S. dollar on the back of the news, while the dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was down 0.84% to trade at 78.13.
Dollar weakness usually benefits gold, as it boosts the metal's appeal as an alternative asset and makes dollar-priced commodities cheaper for holders of other currencies.
Gold futures found further support as some bargain buying emerged after gold prices suffered their biggest three-day drop since the 2008 financial crisis.
London-based industry group GFMS said in a report earlier that, “Gold's appeal as a safe-haven asset remains intact given the uncertainty in global growth and concerns about Europe's sovereign debt.”
Elsewhere on the Comex, silver for December delivery soared 11.06% to trade at USD33.29 a troy ounce, while copper for December delivery jumped 4.02% to trade at USD3.415 a pound.
Morgan Stanley attributed silver’s recent drop to “growing concerns about industrial usage” and the “high retail component of the investor base.”
