Gold rose to its highest level in 2-1/2 months on Monday as a slide in global stock markets, exacerbated by mounting tensions between Western powers and Saudi Arabia, forced investors to find safety and unwind some bearish bets in the metal. Spot gold gained 0.7 percent to $1,226.50 per ounce by 2:22 p.m. EDT (1822 GMT), having earlier climbed more than 1 percent to touch a peak of $1,233.26, the highest since July 26.
US gold futures settled up $8.3, or 0.68 percent, at $1,230.3. "People are running towards safety and flocking to gold on concerns about Italy's debt, United States' relationship with China and Saudi Arabia," said Michael Matousek, head trader at US Global Investors. "As gold is breaking out to new levels, it is pulling in more people besides making some to cover their short positions."
World markets were in the red again on Monday as a bounce in oil prices and rising tensions between Western powers and Saudi Arabia added to concerns that battered global stocks last week. On the technical front, gold poked above the 100-day moving average at around $1,227 and a close above it could provide additional support, analysts said.
Data showed speculators extended their net COMEX gold short positions in the week to Oct. 9.
Holdings of SPDR Gold, the largest gold-backed ETF, rose nearly 2 percent last week. That was the biggest weekly inflow since January, following declines of more than 4 million ounces since hitting a peak in late April. In other precious metals, platinum rose 0.2 percent to $838.25 per ounce after touching its highest level since July 10 at $850.10. Palladium climbed 1.7 percent to $1,083.90 and silver gained about 1 percent to $14.69.
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