Gold Bullion (GOLD)

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Gold, Silver Hit 4-Week High On Easing Hopes


Jun 06, 2012 (Dow Jones Commodities News via Comtex) --

--Comex August gold settles up $17.30, or 1.1%, at $1,634.20 a troy ounce

--Silver climbs 3.8% to $29.488/oz on hopes for central-bank monetary easing

--Indian gold prices hit fresh record, underline demand worries from key consumer
By Matt Day

NEW YORK--Gold and silver prices surged on Wednesday, continuing a rebound from their recent lows as investors bet that easy-money policies from central banks in Europe and the U.S. would drive demand for the precious metals as currency alternatives.

The most-actively traded gold contract, for August delivery, rose $17.30, or 1.1%, to settle at $1,634.20 a troy ounce on the Comex division of the New York Mercantile Exchange, the highest ending price since May 7.

The renewed life in the battered gold market--futures, through Wednesday, were up 4.4% from a week ago--has come as investors bet that flagging global growth would compel central banks to pump more money into the global financial system. Gold and other precious metals can benefit from such accommodative monetary policies, as investors seek a hedge against declines in paper currencies.

On Wednesday, Federal Reserve Bank of Atlanta President Dennis Lockhart said that "further monetary actions to support the recovery will certainly need to be considered" if modest domestic growth is no longer realistic.

Silver for July delivery gained 3.8% to settle at $29.488 a troy ounce, the highest settlement since May 7.

Silver tends to move in tandem with gold, since investors buy both precious metals as safe-haven investments. But, unlike gold, silver has a wide variety of industrial applications, making prices sensitive to changes in the economic growth outlook.

The euro, which jumped on Wednesday against the U.S. Dollar after the European Central Bank held its benchmark interest rate steady, gave precious metals and other commodities a lift. A weaker dollar makes dollar-denominated commodities appear cheaper for buyers using other currencies.

Industrial bellwether copper rose 2.7% and Nymex crude oil was recently up 1%.

"Some kind of easing is becoming increasingly needed and, as a consequence, increasingly likely," said Marc Ground, an analyst with Standard Bank, in a note. He added that easing "would be bullish for precious metals."

Traders were looking ahead to Federal Reserve Chairman Ben Bernanke's Congressional testimony, scheduled for Thursday.

Volume in Comex metals trading picked up on Wednesday with the return of London-based market participants who had been on holiday earlier this week. Markets in the U.K., a key metals-trading hub, were closed on Monday and Tuesday for a public holiday.

Gold's gains came despite worries that demand from traditional top consumer India would remain subdued as currency moves keep prices at record highs in local terms. Gold prices have remained high despite the swings in New York-traded gold due to weakness in the Indian rupee. The price in India hit a record high on Wednesday.

Prithviraj Kothari, president of Bombay Bullion Association, said he expects India's gold imports in June to be less than half of the 55 metric tons to 60 metric tons imported during the same month in 2011.

"The physical market remains weak, but prices have been able to sideline this weakness in the past should investment demand plug the gap," Barclays analyst Suki Cooper said in a note.

--Biman Mukherji, Debiprasad Nayak and Alex MacDonald

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