Gold rises on Korean ship incident Allen Sykora From: Dow Jones...

Gold rises on Korean ship incident

Allen Sykora
From: Dow Jones Newswires
March 27, 2010 9:50AM

GOLD closed higher today, initially rising with the euro after an accord among European leaders to help Greece with its debt issues and extending gains after news reports of a South Korean naval ship sinking near the North Korean border.

The foreign-exchange moves bolstered gold since investors often buy the metal as a hedge against US dollar weakness, plus a softening greenback helps commodities generally by making them cheaper in other currencies.

The South Korean incident prompted flight-to-safety buying in gold and the Treasury market just in case there were hostilities in the region, rather than an accident.

"The funds are starting to nibble again," said George Gero, vice-president with RBC Capital Markets Global Futures. "There was a relief rally that caught some legs because of Korea."

June gold, the contract month with the most open positions, rose $US11.30, or 1.03 per cent, to settle at $US1105.40 an ounce on the Comex division of the New York Mercantile Exchange. April climbed $US11.40, or 1.04 per cent, to $US1104.30.

Most-active May silver rose US16.5 cents, or 0.99 per cent, to $US16.906.

"The big story is the apparent agreement on the Greek situation that drove the euro higher and helped out gold," said the head of one precious metals trading desk.

Shortly after the gold pit closed, the euro was up to $US1.3399 from $US1.3282 late in the previous New York session.

June Gold later hit its hit its session high of $US1108 with roughly an hour left in the pit session following reports of the South Korean naval ship sinking, Mr Gero said.

"The shorts didn't know what to do, so they covered," said a trader. This is buying by market participants who previously sold in order to exit positions.

However, the trader said, gold did back down slightly from its peak since there's no word on whether the South Korean ship sank due to anything done by North Korea or if the incident instead was simply an accident. The 1200-tonne ship sank in the Yellow Sea after an explosion on board. Military officials said 58 of 104 crew members have been rescued.

"There's a whole bunch of rumour and innuendo, and looking for confirmation of facts," he said.

Another trader also commented that gold popped up shortly after the South Korean development, although he also said it's possible much of the strength was technically oriented buying.

"It popped very quickly. It could have been buy stops," he said. "But that (South Korean news) might have influenced things."

Meanwhile, July platinum settled down $US11.10 or 0.69 per cent, to $US1600.70 an ounce. This was the only precious metal to decline one day after it outperformed the others. A trader cited selling to square positions and book profits ahead of the weekend.

June palladium rose $US2.70, or 0.60 per cent, to $US455.30.

http://www.theaustralian.com.au/business/markets/gold-rises-on-korean-ship-incident/story-e6frg91o-1225846250558