Gold rallied for a fourth day on Monday as the euro firmed to a three-month high against the dollar and as prices of other commodities such as crude oil jumped. Spot gold rose as high as $1,190.40 an ounce and was bid at $1,184.75 an ounce at 1505 GMT, against $1,181.50 late in New York on Friday. US gold futures for August delivery rose $5.50 to $1,187.20.
Simon Weeks, head of precious metals at the Bank of Nova Scotia, said gold had risen above the 100-day moving average at $1,183 an ounce on the back of currency moves and rising oil prices. "Next resistance is $1,200-$1,205," he said.
He added that gold remained vulnerable to losses, especially if equity markets continued to climb. "People will liquidate safe havens and put risk on," he said. Gold managed to arrest a slide that last week took it to a three-month low of $1,156.90 an ounce and then turn higher in its best run since late May.
Gold is showing signs of re-establishing its usual inverse link with the dollar and is benefiting from gains in other commodities, given that it is often bought as part of a commodity basket by investors. Investment in gold has ebbed recently, however, as assets seen as higher risk such as stocks have firmed.
The world's largest bullion exchange-traded fund, the SPDR Gold Trust, reported its biggest outflow in a year last month, with holdings down more than 38 tonnes in July to 1,282.3 tonnes.
Wall Street rose on Monday, building on last month's solid gains as investors focused on encouraging corporate results, including strong bank earnings out of Europe. Other assets seen as higher risk also rose, with oil prices climbing nearly 3 percent above $80 on Monday as macroeconomic indicators in top energy consumers the United States and China showed slower but sustained growth.
In the United States, the Institute for Supply Management said its index of factory activity fell to 55.5 in July from 56.2 in June. This was its lowest reading this year but remained above consensus and above the 50-mark, which separates contraction from expansion in the US manufacturing sector.
Ongoing concern about the strength of the US economic recovery pushed the dollar to a three-month low on Monday, while the euro extended gains to above an important technical level that analysts say suggests the currency's rally is gaining momentum.
Lower prices, meanwhile, encouraged higher gold demand from key bullion-consuming centres China, India and the Middle East. The World Gold Council said the International Monetary Fund sold 17.4 tonnes of gold in June as part of a planned programme of bullion sales. That leaves 120.2 tonnes of gold still to be sold under the programme.
Silver was up by over 2.5 percent at $18.42 an ounce versus $17.96, making this its strongest one-day performance since early June, while its ratio to gold - or how many ounces of silver are needed to buy an ounce of gold - hit its lowest since mid-May at 65.0. Platinum was at $1,586.50 an ounce against $1,566.55, while palladium was at $508.50 against $491, having hit its highest since mid-May earlier in the day. Both metals generated significant interest on the New York futures market last week, according to the Commodity Futures Exchange Commission's Commitment of Traders report.
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