Gold rallied nearly 2 percent to above $800 an ounce on Monday as the dollar slipped from highs against the euro and oil prices rose, fuelling active short-covering after heavy sell-offs last week. Silver jumped more than 4 percent, and platinum and palladium rallied nearly 5 precent also on technical buy-backs, after heavy sell offs last week hammered them down to multi-month lows.
Precious metals prices were mainly up due to technical short-covering, but many investors were careful about buying too actively amid concerns over a slower economy and a strengthening dollar, traders said. "Gold rebounded mainly on technical short-covering," said Shuji Sugata, manager at Mitsubishi Corp Futures and Securities Ltd in Tokyo.
"Gold and other metals have recovered a bit, but it's still early to say they will recover continuously. Gold and oil prices are still in a downward trend," Sugata said. As of 0640 GMT, spot gold was trading at $800.25/801.75 an ounce, up 1.6 percent from $787.65/789.25 late on Friday in New York. It touched an interday high of $801.55.
COMEX gold futures rallied on Monday after falling nearly 3 percent in New York on Friday. The most active December contract traded $13.1 higher at $805.20, up 1.7 percent from the New York settlement.
In Japan, the benchmark June 2009 contract on the Tokyo Commodity Exchange was trading at 2,850 yen per gram, up 37 yen or 1.3 percent from Friday. A recovery in oil prices and the dollar's slight falls from highs encouraged active short-covering in precious metals, but traders were nervous about buying too strongly due to the US currency's underlying bullishness against the euro.
"Gold and precious metals have been oversold and the pace of falls was clearly too rapid. Gold is gaining some support with end-users also showing demand on price dips," said Hiroyuki Kikukawa, an analyst at IDO Securities.
Spot gold dropped to as low $773.90 on Friday, the lowest since November 20. The spot price dropped about 10 percent last week. "Active sell-offs may slow, but a rapid recovery is also not expected as there is plenty of selling interest if gold rises back to around $850," Kikukawa said.
Oil rose over $1 to above $115 a barrel as investors eyed a potential supply threat from Tropical storm Fay to oil and gas production in the Gulf of Mexico. US light crude for September delivery was up $1.28 at $115.05 a barrel. The contract settled down $1.24 at $113.77 a barrel on Friday, after dipping to $111.34, the lowest level since May 2.
The dollar hit a six-month high against the euro on Monday then slipped as oil prices rebounded, but worries about the euro zone economy stalling kept its losses limited.
Silver jumped more than 4 percent on Monday, advancing in line with gold on short-covering following heavy sales last week. Silver was at $13.24/13.30 an ounce compared with $12.74/12.84 in late Friday New York trade. It hit an intraday high of $13.29. Platinum was trading at $1,425.50/1,445.50 an ounce, up 4.7 percent from $1,365.00/1,385.00 in New York. Palladium jumped to $289/297 an ounce from $281/289 on Friday.