Gold rose for the second time in three sessions as a weakening dollar boosted demand for the metal as an alternative asset.
The euro advanced against the U.S. currency after Europe pledged 150 billion euros ($196 billion) to the International Monetary Fund to help stem the region’s debt crisis, and as the European Central Bank widened its support for bond markets. Bullion also gained after German business confidence unexpectedly rose for a second month in December.
“We moved up on a better-bid euro, after the headlines that the IMF may put in more funding to help Europe,” Bart Melek, an analyst at TD Securities in Toronto, said in an e- mail. Investors buoyed by signs of progress in Europe had a bigger appetite for risk and were more willing to bet on assets that may bring better returns than the dollar, which is often sought as a haven during market turmoil, Melek said.
Gold futures for February delivery climbed 1.3 percent to settle at $1,617.60 an ounce at 1:36 p.m. on the Comex in New York. Bullion fell 6.9 percent last week as the dollar rallied against the euro. It has gained 14 percent this year.
The euro rose as much as 1 percent today against the dollar. The 30-day correlation coefficient between gold and the euro is at 0.59, compared with minus 0.35 on Oct. 7, data compiled by Bloomberg show. A figure of minus 1 means the two tend to move in opposite directions, and 1 means they move in lockstep.
“Gold below $1,600 is very attractive to investors who still believe in the longer-term uptrend,” said Yang Shandan, a senior trader at Cinda Futures Co., rated the second-best China gold analyst in a Futures Daily and Securities Times poll. “The dollar will remain a key driver of near-term prices.”
Silver futures for March delivery gained 2.3 percent to $29.536 an ounce on the Comex, paring its loss this year to 4.5 percent.
On the New York Mercantile Exchange, platinum futures for January delivery advanced 1.4 percent to $1,432.90 an ounce. The metal is down 19 percent this year. Palladium futures for March delivery gained 1.8 percent to $628.60 an ounce. Prices have dropped 22 percent in 2011.
To contact the editor responsible for this story: Steve Stroth at email@example.com