MW: Gold futures rally as much as $40 as dollar drops
German and French leaders vow to strengthen European banks
By Myra P. Saefong and Polya Lesova, MarketWatch
SAN FRANCISCO (MarketWatch) — Gold futures climbed by as much as $40 an ounce in a broad metals rally Monday, with investors showing strong appetite for commodities and stocks as the U.S. dollar fell.
Gold for December delivery GC1Z +2.05% traded up $37.30, or 2.3%, at $1,673.10 an ounce on the Comex division of the New York Mercantile Exchange, after climbing $40.90 earlier to touch an intraday high of $1,676.70. Other metals traded sharply higher to start the week as well, paced by a big advance for palladium.
If they settle around the $1,673 level, prices for gold would mark their strongest close since Sept. 22.
“Gold is remaining bid-up on not just [a weaker] dollar, but particularly buoyant physical demand amongst retail investors,” said Ross Norman, chief executive at London-based bullion brokers Sharps Pixley.
“Demand in China has been especially strong with the bars selling at more than a $3 premium over London prices,” he noted.
The gains for gold came as the dollar dropped against major rivals. Gold and the dollar tend to move in opposite directions, as a decline in the dollar makes gold cheaper and therefore more attractive for holders of other currencies.
The dollar index DXY -1.66% , which tracks the performance of the greenback against a basket of other major currencies, fell 1.8% to 77.360. Read about Monday’s currencies action.
The euro EURUSD +1.95% surged after the leaders of Germany and France vowed to do all that’s needed to strengthen the European banking sector. The two leaders said a package of measures will be revealed by the end of the month, but they otherwise provided few details. Read more about the Merkel and Sarkozy meeting.
On Wall Street, investors liked what they heard, as the Dow Jones Industrial Average DJIA +2.50% traded sharply higher, lately up about 2.5% on the session.
In other metals trading Monday, December silver futures SI1Z +3.17% rose $1.19, or 3.8%, to $32.18 an ounce.
December palladium PA1Z +5.00% led the percentage gains among the major metals, adding 4.7%, or $27.30, to $613.15 an ounce, while January platinum PL2F +2.19% rose $30.50, or 2%, to $1,523.80. December copper HG1Z +3.15% also climbed by 11 cents, or 3.5%, to $3.39 a pound.
For gold, “physical sales in China for Golden Week are 50% higher than levels seen a year ago when gold was over $300 per ounce cheaper,” said Norman, referring to spot gold prices.
Spot gold prices have “gone into hibernation following record prices at $1,920 in early September and then the most monumental fall of over 20%. Gold has just recovered from that unusual bout of volatility and the mood is quietly positive,” he said.
