Singapore - Gold jumped more than 2% on bargain hunting on Monday as a 9% fall in prices last week, a recovery in crude oil prices and a weaker dollar against the euro gave investors enough reasons to step in.
Gold's strength spurred gains in other precious metals, with platinum rising almost 5% despite poor outlook as the global financial crisis and weaker economic growth in the United States forced automakers to slash output.
Gold was trading at $794.30 an ounce, up $12.80 from New York's notional close on Friday, when it hit a low of $771.30, as a lack of confidence in the financial system and a dollar rally ignited heavy liquidation by commodity funds.
Gold has lost about 23% from its lifetime high of $1 030.80 struck in March.
"Gold prices certainly look much lower now, as compared to a week ago and I guess some people will be looking at picking some. I am not convinced that the selling is over. That's more from a technical view," said Adrian Koh, analyst at Phillip Futures.
"From what I noticed in the open interest, it seems like it is steadily moving lower from the peaks around the middle of the year, and with prices heading towards the downside, it simply means that funds and investors are moving money out of the markets."
Opec output cut on the cards
Noncommercial investors, or speculators, were net long on 106 825 contracts of gold futures traded on the New York Mercantile Exchange's COMEX metals division in the week ended October 14, down from 111 613 contracts in the week to October 7.
"It simply means the large speculators are reducing their net longs. It also means that less large speculators are bullish on the market as compared to previous weeks," said Koh.
"Nearby support will be around the $780 region. The market now is above those regions, so if we do hold above those regions, we should see a bit of consolidation around those regions," he said.
Oil gained more than $1 to above $73 a barrel on expectations Opec could cut output at an emergency meeting this week. Oil prices have fallen more than 50% from their peakabove $147 a barrel.
The euro rose to $1.3456 against the dollar.
Platinum was trading at $885.00 ounce, up $34.50 an ounce from New York's notional close, having fallen to $831.50 an October 16, its weakest since December 2004, as fears of a global recession threatened to cut demand for autocatalysts.
J.D. Power and Associates, which tallies US auto sales on a daily basis, sees October sales on track to hit the lowest level in 17 years with a sales rate below 12 million units.
More than 60% of global platinum use goes to autocatalysts to clean exhaust fumes. It hit a record high of $2 290 in March on supply worries following a power crisis in main producer South Africa.
New York gold futures rose $9.0 ounce to $796.8.
- Reuters