Gold Rises 1% from 6-Year Low as Dollar Retreat Prompts Short Covering

Gold Rises 1% from 6-Year Low as Dollar Retreat Prompts Short Covering

Gold rose 1% on Tuesday, rebounding from the past week about 6-year low, as a shelter in the United States dollar led investors to cover short positions ahead of a meeting of the European Central Bank and the US payrolls data this week.

The dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was down 0.4% to 99.87, off Monday’s eight-month peak of 100.35, with traders judging that a significant amount of further monetary easing had already been priced into the single currency ahead of Thursday’s ECB meeting.

Spot gold gained 0.5 percent to $ 1,069.00 an ounce, while the US Gold futures for February delivery climbed $ 2.90 an ounce at $ 1,068.20. The metal hit its lowest level since February 2010 last week at $ 1064.46.

The gains were limited as market participants were preparing for a hike in interest rates by the Fed later this month. Gold tumbled to $ 1051.60 on Friday, the lowest since February 2010.

The yellow metal fell about 7% in November, amid increasing expectations that the Fed to raise rates for the first time in almost one decade at its meeting in mid-December.

Data from the Commodity Futures Trading Commission in the United States showed on Monday that hedge funds and money managers added a net short position in COMEX gold contracts for the week ended November 24.

That has prompted some to judge that shorts have become overextended.

At the Multi Commodity Exchange, gold for delivery in December was trading higher by 0.50%, to Rs 25,195 per 10 gram as speculators created fresh bets amid positive cues from the global markets.

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