Gold surged 3 percent and hit a one-month high on Monday, vaulting back over a technical threshold at $1,300 an ounce as speculators fearing a reversal of the recent downward price trend rushed to buy back bearish bets. It was the gold's heftiest one-day gain in 13 months and its three-day rally is the biggest in almost two years. Also contributing was heavy short covering as futures investors anticipating the start of delivery period on August contracts rolled positions from August to December. The first day for delivery notices is July 31.
"With more shorts being built over the last couple of months, it's not surprising to see that the shorts have to cover their positions with the increase of prices," said Carlos Sanchez, director of commodities and asset management at CPM Group. Spot gold was up 3 percent at $1,334.31 an ounce by 3:35 pm EDT (1935 GMT), after hitting a high of $1,338.91, its loftiest price since June 20. US gold futures for August delivery settled up $43.10 an ounce to $1,336, with trading volume about 15 percent above its 30-day average, preliminary Reuters data showed. Silver rallied 5.4 percent to $20.51. Among other precious metals, platinum rose 1.4 percent to $1,443.75 an ounce, while palladium eased 0.1 percent to $743.97.