Daily Gold Update

Source: MarketWatch

San Francisco— The April contract for gold futures climbed to a more than one-week high near $570 an ounce Monday, with political uncertainty surrounding Iran's nuclear ambitions and the surprise victory of Hamas in last week's Palestinian elections all creating safe-haven demand.

Gold for April delivery was last up $4.50 at $568.20 an ounce on the New York Mercantile Exchange after trading as high as $569.70. Prices for the contract climbed to a high of $573.70 on Jan. 20. The lead-month contract that day was February gold, which climbed to $568.50, the highest front-month futures level since January 1981.

The metal is expected to continue to trade off political uncertainty, although volumes are lighter than normal with much of Asia closed for the Lunar New Year holiday.

"It is certainly possible that the gold market will see some fresh flight to quality interest off the rising tensions in the Middle East," Nell Sloane, an analyst at NSFutures.com said in daily commentary.

"But with the dollar also showing significant strength last week, it is possible that dollar strength ends up countervailing any flight to quality interest that might be seen in gold," she said.

And "there are also looming risk events, including tomorrow's [Federal Reserve policy-panel meeting], that have served to reduce impetus to trade," said Action Economics economists.

The Federal Reserve is expected to raise its key interest-rate target by another 25 basis points to 4.5% on Tuesday, its 14th straight increase.

But for the first time since it starting boosting rates in June 2004, the Fed will pull the plug on the forward-looking language that has guided markets toward conclusions about future rate moves. It is likely to retreat to its old tradition of keeping markets guessing, economists said.

Still, "the longer-term outlook for gold remains robust, given constrained output and soaring physical demand from the major emerging economies of India and China," said Action Economics.

On the supply side, copper inventories were up 1,700 short tons at 11,758 as of late Friday, according to the New York Mercantile Exchange.

Gold stocks were up 192 troy ounces at 7.32 million troy ounces, while silver supplies were up 598,139 troy ounces at 124.8 million.

Most other metals were higher in morning trading. March silver was last up 20 cents at $9.805 an ounce, trading at a 19-year high. April platinum was up $6.300 at $1.079 an ounce after a 26-year high of $1,082, and sister metal March palladium was up $5 at $283 an ounce.

March copper was lower, trading last down 0.1 cent at $2.232 a pound.