Gold rebounded sharply from the earlier 2% losses it had posted after a vote by Switzerland against the proposal to boost the gold reserves, driven by the weaker dollar and the softening appetite for high risk assets such as stocks.
On Sunday, Swiss voters rejected a proposal to lift the gold holdings of the central bank to around 20 percent of the forex reserves. Gold dropped to lows of $1,142.91 before it bounced back to a peak of $1,197.10 with the traders judging the move as overdone.
According to Reuters, spot gold climbed 2.4% at $1,194.98 and December delivery US gold futures climbed $18.20 at $1.193.70 per ounce. On the Comex, February delivery gold futures rose 2.5% to $1,204.40
Ole Hansen, Saxo Bank’s head of commodity research said, “Selling appetite was there, but as it turned out, they were not prepared to hang onto the conviction for that long. Buyers were lurking below $1,150.”
He added, “A close back above $1,180 today will be viewed as positive and most likely trigger some additional short covering. Overall, the dollar remains a key driver and after some early strength, not least against the Japanese yen, it has since given back some the gains, thereby giving metals some support.”
Risk appetite is a slack on wider markets after being hurt by the slowing factory activity in Europe and China, European stocks dropping 0.4%, oil prices hitting lows of five years and Wall Street opening weaker.
The dollar index dropped 0.5%.
Bloomberg quoted Tai Wong, director of commodity products trading at BMO Capital Markets Corp as having said, “The move is snowballing as recent short covering and micro-term momentum buyers go long.”
Silver rose 4.2% at $16.05 per ounce after it had rallied earlier as high as 6% to a peak of $16.34.
Platinum added 1.8% to $1,217.50 per ounce and palladium rose 0.1% to $807 per ounce.
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