Precious metals rallied strongly in New York on Thursday, led by gold's rise to a two-month high above $400 an ounce, amid a confluence of technical and geopolitical factors.
Gold grabbed the spotlight as a safe haven, rallying 2 percent after insurgents intent on disrupting the June 30 US handover to Iraqi rule launched co-ordinated overnight attacks that killed about 100 people in five Iraqi cities.
The yellow metal accelerated higher when news hit the wires just as New York metals trading opened that an explosion tore though a bus in Istanbul, Turkey, killing four. In the day a small parcel bomb exploded outside a hotel in Ankara, where US President George Bush is due to stay this weekend.
August gold ran into stop-loss purchase orders that pushed it to $404.00, its highest price since April 19. The contract settled up $8.00 at $403.50, having bottomed at $394.80 overnight.
Estimated volume was a moderate 75,000 contract. "There are about four things converging, could be five," said Graham Leighton, a vice president of bullion trading at Society Generale.
Spot gold was quoted at $402.25/3.00, up from Wednesday's close at $394.50/5.25 but marked down from London's afternoon fix at $400.00 an ounce. Short-covering unfolded as August gold moved above the 200-day moving average at $399.00 and the 100-day moving average at $400.20.
Trend-following commodity funds jumped in to capitalise on the breakout. Expectations of higher dollar deposit rates had capped gold, which carries no yield, until traders rejoiced positions on Thursday.
Gold had been range trading below $400 in anticipation of the Federal Reserve's interest rate-setting Federal Open Market Committee meeting next on Tuesday and Wednesday.
"There are two camps," said James Pagoda, a vice president of precious metals at Mitsubishi International Corp.
"One that's going to view these rate rises as dollar positive and it will be gold bearish, and the other that will view it as 'it's kind of in the market already."
The dollar's decline to record lows against the 5-year-old euro this year lifted gold to 15-year highs near $430 an ounce in April, as an alternative currency investment.
Futures markets had fully priced in a quarter percentage point hike from months of signals that policy-makers would move to prevent the rebounding economy from overheating. "People are saying that for the half-year end, and for the FOMC, and for the handover in Iraq, it's probably better to be small long than anything else," Leighton said.
Dealers said the expiration on Thursday of Comex July options on futures also played a role in the buying, as holders of the $400 call options gunned for that popular strike price to ensure those bullish bets ended in the money.
July silver outdistanced gold, rising 30 cents or 5.1 percent, to $6.175. It reached a 23-day high at $6.20 from a low of $5.86. Spot silver rose to $6.15/18 from the previous close at $5.86/88 and on Thursday's fix in London at $5.875.
July platinum went up $3.60 to $813.00 an ounce. Spot fetched $809/814.
September palladium rose $6.60 to $228.90. Spot was quoted $227/232.
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