Source: Deborah Kinirons and Melanie Lovatt, BridgeNews
New York— COMEX Dec gold futures settled up $3.6, or 1.27%, at $270.3 per ounce Monday after hitting a one-month high of $271.0. Gold gained amid short-covering as pressure eased from the recent strong dollar. Silver was also higher, settling up 7.0 cents at $4.698 an ounce.
Gold's move came in heavy estimated volume of 75,000 lots. Silver volume was estimated at 39,000 lots.
After its recent strength, the dollar fell back on profit taking following news that Gov. George W. Bush has, lawsuits excepted, won the U.S. Presidential election. Although rumors that the European Central Bank would intervene to push up the euro were dismissed by traders, the nervousness over a potential intervention had kicked off the dollar's move.
The dollar's recent strength had kept downwards pressure on gold prices, since it makes gold expensive in terms of other currencies and thus discourages buying and encourages selling.
In addition to the weaker dollar, gold was helped higher Monday as shorts have become increasingly nervous. The big build up in short positions in gold over the last few months has spurred fears that any upswing in price might trigger a volatile short-covering rally.
One trader noted that in Monday's run-up buy-stops were triggered and one large floor broker that typically conducts fund business was a heavy buyer.
"There is still more room left on the upside-we've not yet crossed significant resistance. We need to be a dollar higher for a clear breakout," said Leonard Kaplan, president of Prospector Asset Management, pinning resistance at $270.50 in the spot market. So far Monday, spot gold has traded just under this level.
Bill O'Neill, director of futures research at Merill Lynch, said that the gold market has seen good interest from trade houses and is starting to attract short-covering. He said that those holding short positions will "get nervous and start to cover" if the price climbs over $271.
"The dollar/euro performance is helping and after first notice day Thursday the liquidation phase will be over and we could see a little bounce in the market. It's not a good time to be short gold," he said.
Othr Metals
Dec silver climbed in tandem with gold, reaching an 11-day high of $4.70. Silver is "dramatically oversold" and if it is pushed a bit higher by gold there could be "an explosion on the upside," said Kaplan, noting that silver can be "a lot more volatile and vicious" than gold because it's a thinner market.
However, O'Neill noted that while silver may follow gold to higher prices, he sees it as "a lot less vulnerable to a short-covering rally."
Nevertheless at the $4.60 level it will see interest from traders and consumers and based on the fundamentals, it "shouldn't be lower than the prices it's at now," said O'Neill. He suggests that it is undervalued given the currently strong photographic and industrial demand, although notes that the weak rupee has hurt demand from India, the world's largest consuming country.
Meanwhile, platinum and palladium were also benefiting from the dollar's slip and were helped by the climb in gold and silver prices.
Jan platinum settled up $12.2 at $595.5 per ounce, after hitting a 2-week high of $595.90, while Mar palladium was up $2.85 at $793 per ounce after jumping to a 3-week high of $794.80. "Platinum and palladium are steady. There's good demand and not a lot of metal around. You can't be short these markets," said O'Neill.
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