Gold jumps as investors seek safety
Prices rally on haven buying as headlines from Italy present the latest cause for concern.
By Alix Steel, TheStreet
Updated at 3:38 p.m. ET
Gold prices rallied Monday despite a firm U.S. dollar as stronger physical demand and haven buying kicked in.
Gold (-GC) for December delivery added $35 to settle at a session-high $1,791.10 an ounce at the Comex division of the New York Mercantile Exchange. The spot price was most recently rising $40.50, according to Kitco's gold index.
Silver (-SI) prices rose 74 cents to finish at $34.83 an ounce, while the U.S. dollar index was up slightly to $76.97.
In Europe, it's worrisome headlines from Italy. Now that Greece is shifting to an interim government, which should approve austerity measures and its next tranche of bailout money, investors are focusing on the drama unfolding in Italy.
With 10-year Italian bond yields soaring more than 6.6% -- a euro record high -- Prime Minister Berlusconi losing three party members in a week and the lower house preparing to vote on 2012 budget issues Tuesday -- which, if defeated, could trigger another confidence vote for Berlusconi -- investors are bracing for more market volatility and looking to gold for safety.
James Moore, a research analyst at FastMarkets, says current haven buying could push prices "towards the $1,785-$1,800 area in the coming sessions." Gold was rising in all currencies with the strongest gains coming in the Swiss franc -- gold was up 2.68% -- on weekend reports that the Swiss National Bank was ready to take further steps to devalue its currency. The bank has previously pegged the franc to the euro at an exchange rate of 1.2 francs per euro but could raise the rate if need be.
Barclays Capital also reiterated its bullish stance on gold, writing, "We expect near-term buying interest . . . to underpin a move higher. A break above resistance at $1,775 would confirm our bullish view toward our target near $1,840" an ounce.
Rumors were also flying this weekend that Germany or other Eurozone central banks would be forced to sell gold in their reserves to help increase the firing power of the European Financial Stability Fund, or bailout fund. Germany is the second-largest holder of gold in the world, with 3,401 tons, and holds the third most gold as a percentage of its reserves, behind Greece and Portugal, according to the World Gold Council.
At current prices, all of Germany's gold would net $193 billion, well short of the trillion-plus dollars officials were hoping to expand the bailout fund to.
German officials reportedly said Monday that gold will "remain off limits" but that gold in the weaker EU nations could be used as collateral. "Gold's value as money and as a strategically important monetary asset is being slowly realized again," said Mark O'Byrne, the CEO of GoldCorp, a bullion dealer.
Gold mining stocks were bouncing back from Friday's losses, outpacing gains in broader equities Monday. Barrick Gold (ABX) was adding 2.2% at $52.53, while Newmont Mining (NEM) was up 3.1% to $71.50. Goldcorp (GG) was soaring 3.4% to $53.44, and Agnico-Eagle (AEM) was rallying 2.9% to $46.73.
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[BRIEFING.COM] S&P futures vs fair value: -0.40. Nasdaq futures vs fair value: -11.30. The S&P 500 futures trade within a point of fair value.
Asian markets ended the quiet session on a mixed note. The overnight news flow was light, but the chief of Japan's pension fund GPIF said the fund is adjusting its portfolio towards greater exposure to equities.
Economic data was limited. Japan's Household Confidence slipped to 37.5 from 38.3 (previous 40.2), while the weekly ... More
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