Gold rises to one-month high as haven sought

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Gold rises to one-month high as haven sought

Gold rose 1.5 per cent to one-month highs overnight, notching its longest stretch of gains in more than two months, as investors once again sought the safety of bullion in the face of a euro drop and uncertainty over the outcome to a key EU summit.

Bullion has gained nearly seven per cent during its four-day winning streak, and it appeared to reprise its traditional safe-haven role after having moved in sync with riskier assets over the last five weeks and having tracked equities and copper more closely than at any time in the last five months.

Bullion rose as expectations of a comprehensive solution emerging from a second European Union summit have diminished for now. However, investor anticipation that EU will eventually use massive market stimulus to rejuvenate the 17-nation economic zone gave gold a huge boost.

"Investors have been looking for safety with the euro currency selling off. Also weakness in the US equities dragged by disappointing earnings also helped gold," said Phillip Streible, senior market strategist at futures broker MF Global.

"If gold can close higher today, I think it can test resistance at 50-day moving average of $US1,740 an ounce," he said.

Spot gold was up by 1.2 per cent at $US1,721.24 an ounce by 1.47pm EDT (0447 Thursday AEDT), having risen earlier to a one-month high of $US1,726.50.

Gold rose above $US1,700 an ounce for the first time in a month on Tuesday, notching one of its biggest rallies since 2008, fuelled by the gloomiest US consumer sentiment data in two-and-a-half years.

US gold futures for December delivery were up $US22.90 at $US1,723.30 an ounce.

Volume was again in line with its 30-day average after a slower pace in the last several weeks. On Tuesday, gold futures posted their largest turnover in a week at nearly 200,000 lots, or 20 million ounces, topping the 30-day rolling average by its widest margin in a month.

Also, open interest in December gold futures staged its biggest daily rise in three months on Tuesday, pushing open interest up by more than 12,000 lots, or 12 million ounces, to over 273,000 lots, a three-week high.

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Bullish strategies related to the popular $US1,700 calls also boosted underlying futures prices as COMEX November options are scheduled to expire at the end of the trading day.

COMEX gold options floor traders Jonathan Jossen said heavy buying of the bull call spread between $US1,700 and $US1,750 could further support gold's rally. Others also bought the $2,000 calls as well as puts to hedge downside risks, he said.

High uncertainty as EU officials wrangled over how to scale up the euro zone rescue fund and over how much of a loss private bondholders will take on Greek debt has prompted investors to seek a shelter in gold.

The incoming head of the European Central Bank threw the euro zone a lifeline hours before a crucial summit Wednesday by signaling the bank would go on buying troubled states' bonds to combat market turmoil.

Independent investor Dennis Gartman said that gold soared on expectations that the ECB would have no choice eventually but to join the Federal Reserve and other central banks in adopting quantitative easing measures.

"The question in our mind is not if the ECB moves in this direction, but when," Gartman said.

This week so far has seen the largest two-day rise in global holdings of gold in exchange-traded products since early August, having increased by over half a million ounces to 67.768 million ounces.

In other metals, silver was up 0.3 per cent at $US33.32 an ounce, echoing the strength in gold.

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Platinum was up two per cent at $US1,588.49 an ounce, while palladium was up 1.3 per cent at $US645.22.

Reuters

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