Metals Stocks
Nov. 2, 2009, 11:09 a.m. EST
Gold futures rise above $1,060 an ounce as dollar falls
By Polya Lesova & Nick Godt, MarketWatch
NEW YORK (MarketWatch) -- Gold futures gained more than 1% on Monday, as upbeat economic reports from the U.S., China and Europe pressured the U.S. dollar, lifting the appeal of the precious metal.
Gold for December delivery rose $20.10, or 1.9%, to $1,060.50 an ounce on the New York Mercantile Exchange.
Earlier in the session, the contract hit an intraday high of $1,059.20 an ounce. Other metal prices also gained, with December silver futures rising 23 cents, or 1.4%, to $16.48 an ounce and December copper up 2 cents, or 0.5%, to $2.97 a pound.
The dollar index (INDEX:DXY) , which tracks the performance of the greenback against a basket of other major currencies, fell to 75.965 in recent trading from 76.320 late Friday.
The U.S. unit has tended to be used as a safe-haven currency over the past year, losing its appeal on upbeat news. A weaker dollar, in turn, helps boost hard assets, such as commodities and gold.
And economic reports this week take on added significance ahead of the Federal Reserve's monetary policy announcement on Wednesday. Confirmation last week that the U.S. economy returned to growth in the third quarter failed to prevent a sell-off in stocks on Friday amid concerns over consumer spending.
Gold prices fell 0.6% on Friday, still holding to a 3.8% advance for the month of October.
But stocks rallied on Wall Street after a U.S. manufacturing index rose much more than expected in October. The Dow industrials (INDEX:INDU) recently gained 120 points.
The SPDR Gold Trust (NYSE:GLD) , the largest exchange traded fund dedicated to gold, gained 1.5%.
The Institute for Supply Management said its factory index rose to 55.7% in October from 52.6% in September, and much higher than the reading of 53.0 expected by economists surveyed by MarketWatch. Readings above 50 indicate expansion. See full story.
Reports on U.S. pending home sales and construction spending also improved.
The upbeat tone began earlier as manufacturing reports from China and Europe boosted hopes for global growth, pressuring the dollar.
Crude-oil prices rose more than 1% to top $78 a barrel, as the data lifted hopes for a recovery in oil demand. See Futures Movers.
Also boosting gold, CIT Group Inc. (NYSE:CIT) , in one of the biggest corporate bankruptcies ever, filed for Chapter 11 protection in New York on Sunday.
CIT, a major lender to small and midsize businesses, has struggled to avoid collapse since the recession triggered billions of dollars in loan losses and the financial crisis cut the company off from its main source of financing. See full story.
"The U.S. banking crisis is not over yet, as was indicated this weekend by the insolvency of CIT," wrote analysts at Commerzbank in a note to clients. "This event may induce investors to increasingly shift to safe-haven gold again."
Gold is traditionally seen as a safe-haven asset. Investors tend to buy it at times of financial turmoil.
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