* Allen Sykora * From: Dow Jones Newswires * January 05, 2010 7:06AM
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gold
Gold rallied in New York as investors' risk appetites improved after the holiday break. Source: Bloomberg
GOLD rose to its strongest level since mid-December today in New York, as an appetite for risk returned to commodities and equities.
Analysts cited several factors, starting with a willingness of funds to put investment money back to work at the start of a New Year after previously selling gold to square old positions and book profits before 2009 wound down.
Stronger manufacturing surveys around the world improved sentiment, as did geopolitical events such as concerns about Iran's nuclear program and a clash in Yemen.
On top of all this, the US dollar was on the defensive, and investors often buy gold as a hedge against dollar weakness.
KEY COMMODITY PRICES: oil, gold, base metals, livestock and wheat
Buy stops, which are pre-placed orders triggered when certain chart points are hit, were activated for gold, accelerating the gains.
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Lightly traded but nearby January gold rose $US22.50 to $US1117.70 an ounce on the Comex division of the New York Mercantile Exchange, while most-active February climbed $US22.10 to $US1118.30. The latter peaked at $US1124.60, its strongest level since December 17.
"There's money moving back into the marketplace from the funds for beginning-of-the-year investment," said Ira Epstein, director of the Ira Epstein division of The Linn Group.
Gold spent much of December on the decline. Much of that selling was in the form of traders exiting positions in order to book profits ahead of year-end, said Bob Haberkorn, Lind-Waldock senior market strategist.
"So the natural resistance that was there is no longer there," said George Gero, vice-president with RBC Capital Markets Global Futures. In fact, he and others said, commodity and hedge fund buying resumed. This start-of-the-year buying has been a trend in recent years, Mr Epstein said.
Most-active March silver followed gold, rising US61.8 cents to $US17.463.
The US dollar weakened as investors snapped up riskier investments following stronger global manufacturing data, currency analysts said. Shortly after the gold pit closed, the ICE Futures US dollar index was down 0.460 point to 77.760.
The HSBC China Manufacturing Purchasing Managers Index, a gauge of nationwide manufacturing activity, rose to 56.1 in December from 55.7 in November, HSBC Holdings said yesterday. In the US, the Institute for Supply Management's December purchasing managers index rose to 55 from 53.6 in November, topping the forecast of 54.
Cold weather in the US indirectly played a role in gold's rise as it followed crude oil higher, Mr Gero said. Oil rose as the market factored in increased heating demand, and funds often buy other commodities such as gold at the same time they're buying oil.
Some of the geopolitical issues that also supported oil in turn helped gold, Mr Gero said.
In particular, analysts cited worries about the potential for a disruption of Russian oil supplies to Belarus as negotiations continue, tensions regarding Iran's nuclear program, plus developments in Yemen, where security forces killed two suspected al-Qaida militants in clashes. Shortly after the gold close, February crude oil was $US1.99 higher at $US81.35 a barrel.
