A firmer stock market, weaker dollar and a strike at a gold mine sent US gold futures sharply higher in heavy trade early on Friday, ahead of a statement by US President George W. Bush outlining reforms to help homeowners with subprime mortgages.
"Still, gold is following stocks almost precisely. It's a combination thereof," said Leonard Kaplan, president of Prospector Asset Management in Evanston, Illinois. At 10:29 am EDT (1429 GMT), most-active gold for December delivery on the COMEX division of the New York Mercantile Exchange jumped $7.50, or 1.1 percent, to $681.40 an ounce, trading between $673 and $683.90.
Kaplan said that financial markets moved higher in response to Bush's upcoming speech to help homeowners who have subprime mortgages avoid default. Kaplan also said that the news of work stoppage at the giant Lihir mine owned by Lihir Gold Ltd in Papua New Guinea triggered Friday's rally in bullion.
The mine, dug out of a long-cooled volcano on Lihir Island about 700 kilometres (435 miles) north-east of Pyield a record 800,000 to 830,000 ounces in 2008, according to company forecasts, making it one of the world's biggest.
US stocks opened higher but cut gains after Federal Reserve Chairman Ben Bernanke said the US central bank was set to act as needed to limit impacts of financial turmoil but will not bail out investors who made poor decisions.
Jon Nadler, senior analyst at Kitco Bullion Dealers in Montreal, said in a client note that market participants were still fixated on the global equity markets. Spot gold was quoted at $672.80/673.40 compared with $664.70/665.50 late Thursday. The London morning fix was set at $668 an ounce. COMEX December silver was up 22.5 cents, or 1.9 percent, at $12.185 an ounce, dealing between $11.930 and $12.275.
Spot silver was quoted at $12.02/12.06 an ounce, compared with $11.75/11.78 late Thursday. London silver fix was at $11.95. NYMEX October platinum rose $7.90 at $1,268 an ounce. Spot platinum fetched $1,262.50/1,269.50. December palladium eased 60 cents to $335 an ounce. Spot palladium was quoted at $329/333.
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