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Gold surges to 1-month high on weak dollar, technical buying

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Shutterstock photo - Gold futures rallied more than 2% to hit a one-month high on Monday, as a bout of technical buying kicked in after prices broke above a key resistance level.

Gold's gains accelerated after breaking above a key technical resistance level close to the USD1,301-level, triggering a flurry of automatic buy orders.

On the Comex division of the New York Mercantile Exchange, gold futures for August delivery traded at USD1,320.35 a troy ounce during U.S. morning hours, up 2.1% on the day.

Comex gold prices rose by as much as 2.3% earlier in the session to hit a daily high of USD1,324.55 a troy ounce, the strongest level since June 20.

Gold futures were likely to find support at USD1,269.45 a troy ounce, the low from July 17 and resistance at USD1,347.45, the high from June 20.

A broadly weaker U.S. dollar contributed to gains, as fears of an imminent winding down of the Federal Reserve's monetary easing program abated for now.

The dollar index, which tracks the performance of the greenback against a basket of six other major currencies, was down 0.3% to trade at 82.44, the lowest level since June 21.

Fed Chairman Ben Bernanke said last week that the pace of the central bank's bond purchases are not a "preset course".

The Fed chief reiterated that the central bank will continue to maintain its accommodative monetary policy for the foreseeable future.

Moves in the gold price this year have largely tracked shifting expectations as to whether the U.S. central bank would end its quantitative easing program sooner-than-expected.

The precious metal is on track to post a loss of 21% on the year amid concerns the Fed will start to unwind its stimulus program by the year's end.

An exit from the stimulus would deal a heavy blow to gold, which has thrived on demand from investors who buy gold to hedge against the inflationary risks of loose monetary policies.

Some technical buying also contributed to gains as traders closed out bets on lower prices after futures moved into oversold territory, a move known as covering a short position.

Elsewhere on the Comex, silver for September delivery soared 4% to trade at USD20.24 a troy ounce, while copper for September delivery rallied 1.5% to trade at USD3.187 a pound. - offers an extensive set of professional tools for the Forex, Commodities, Futures and the Stock Market including real-time data streaming, a comprehensive economic calendar, as well as financial news and technical & fundamental analysis by in-house experts.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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