Gold Gains Sharply As Dollar Drops On Summers News

Gold and silver futures rose sharply in electronic trade Monday as the U.S. dollar sank after former U.S. Treasury secretary Larry Summers withdrew himself from consideration to be the next Federal Reserve chairman.

Gold for December delivery  rose $19.80, or 1.5%, to $1,328.40 an ounce, erasing most of its 1.7% loss Friday on the Comex division of the New York Mercantile Exchange.

December silver  also rallied, climbing 43 cents, or 2%, to $22.15 an ounce.

“Gold prices are trading higher this morning on the back of a weaker greenback. … Going ahead, markets await [the Federal Reserve] policy meeting due on Wednesday for further cues on Fed’s asset-purchase program,” ICICI Bank analysts wrote early Monday.

News that Summers — whom many analysts saw as more hawkish than some of the other leading candidates to run the Fed — had quit the race to lead the central bank sent the dollar falling.

By early Monday afternoon in East Asia, the ICE dollar index  was at 81.087, down from 81.520 late Friday in North America.

A lower U.S. currency can often boost gold and other dollar-denominated commodities by making them cheaper for holders of euro, yen and other units.

For the coming week, the outcome Wednesday of the Fed’s policy meeting remained a key risk event for the metals markets, with Kitco citing Archer Financial Services market strategist Adam Klopfeinstein as saying Friday that the Fed would likely announce a slowing of its monetary stimulus, sending gold prices lower.

“Gold’s in a bear pattern. By the end of the week I think we’ll be at least a little under $1,300, which really isn’t far from where we are now,” Kitco quoted Klopfeinstein as saying.

But on Monday at least, metals futures enjoyed broad gains from the falling dollar, with October platinum  improving by $13, or 0.9%, to $1,457.50 an ounce, and December palladium  trading higher by $9.65, or 1.4%, to $708.75 an ounce.

Likewise, December copper  added 2 cents, or 0.6%, to $3.22 a pound. The metal contract had fallen 1.7% during the previous week.

Source :  Reuters