Gold futures surged to end at a three-week high Tuesday, as investors opted for the safe haven appeal of the precious metal while tracking declining global equity markets. The dollar trended lower against a basket of some major currencies with commodities firming even as worries the U.S. Federal Reserve may begin tapering its quantitative easing program soon continued to weigh on market sentiment.
Investors also brushed aside some upbeat inventories data with wholesale inventories in the U.S. rising much more than expected in October.
Comments from James Bullard, president of the St. Louis Federal Reserve Bank that Federal Reserve may taper its $85-billion dollar monthly asset purchase program next week in response to some better-than-expected jobs growth, also had little or no impact on the market.
Job growth in November pushed unemployment rate in the U.S. down to a five-year low of 7 percent, a Labor Department report showed Friday.
Gold for February delivery, the most actively traded contract, jumped $26.90 or 2.2 percent to close at $1,261.10 an ounce Tuesday on the Comex division of the New York Mercantile Exchange.
Gold for February delivery scaled an intraday high of $1,267.50 and a low of $1,237.40 an ounce.
Yesterday, gold settled marginally higher on value buying despite talks of taper from a trio of Federal Reserve officials, fueling speculation the Fed may scale back its $85-billion dollar monthly asset purchase program next week. "Based on labor market data alone, the probability of a reduction in the pace of asset purchases has increased," St. Louis Fed President Bullard told one group.
Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, were unchanged at 835.71 tons.
The dollar index, which tracks the U.S. unit against six major currencies, traded at 79.94 on Tuesday, down from 80.16 late Monday in North American trade. The dollar scaled a high of 80.18 intraday and a low of 79.84.
The euro traded higher against the dollar at $1.3775 on Tuesday, as compared to its previous close of $1.3739 late Monday in North America. The euro scaled a high of $1.3794 intraday and a low of $1.3728.
In economic news from the U.S., the Commerce Department said wholesale inventories jumped by 1.4 percent in October following an upwardly revised 0.5 percent increase in September. Economists had been expecting inventories to increase by about 0.4 percent, matching the growth originally reported for the previous month. Further, the Commerce Department said wholesales sales also increased by 1.0 percent in October after rising by an upwardly revised 0.8 percent in September.
From Europe, U.K.'s industrial as well as manufacturing output growth slowed in October as expected by economists, the Office for National Statistics showed. Both industrial and manufacturing output grew 0.4 percent each. The rates matched economists' expectations. Overall industrial production increased 0.9 percent in September and manufacturing by 1.2 percent.
