gold up

NY gold rises to 10-day high early, eyes oil, India
Fri Oct 13, 2006 10:36am ET
NEW YORK, Oct 13 (Reuters) - Gold futures rose sharply early Friday, breaking above important technical resistance on fund buying, with a rebound in oil prices providing an incentive to run prices higher.

Around 9:45 a.m. EDT (1345 GMT) at the COMEX division of the New York Mercantile Exchange, gold for December delivery was up $8.50, or 1.45 percent, at $588.80 an ounce, trading from $579.40 to $593, its highest price since Oct. 3.
Physical buying from India, the largest gold consumer, has been robust. India is in the midst of its wedding season, when demand for gold for dowries and andornment usually peaks.

Demand from other traditional consumers in the Middle East and Asia was also a factor.

Spot gold advanced to $585.80/6.80, from $578.10/579.10 late Thursday. London bullion dealers fixed the Friday morning reference price at $577.90 an ounce.


There was talk that a hedge fund bought futures in electronic trade before COMEX opened, running December above $585, which had been tough resistance since gold declined to a four-month low at $563.50 on Oct. 4.

The $585 level was thus considered an upside pivot, "above which the market has ample room to roam," according to Greg Weldon, publisher of The Metal Monitor.


Stop-loss buying after the start of open outcry carried the contract to the high, with dealers talking about the oil correlation trade as NYMEX November crude recovered from 10-month lows to stand 1.7 percent higher.

"Gold really wanted to trade higher all week, but was supressed by crude making new lows every day," said a dealer at a precious metals refining company. "Now that oil is recovered and coming back, gold is just following that lead."

Gold's rally defied a rally in the dollar, which made bullion more expensive for non-dollar investors. Currency traders decided that a 0.4 percent decline reported in September retail sales on Friday, while worse than expected, contained some bright spots.

The dollar garnered more strength from a positive preliminary U.S. consumer sentiment reading for October.

Gold is seen as a hedge against inflation and often tracks oil prices closely, but the metal generally has an inverse relationship with the dollar