SAN FRANCISCO (MarketWatch) — Gold prices closed modestly higher Monday in a session colored by bullion’s technical factors, as investors sold the U.S. dollar on enthusiasm for recent China trade data and an extended timeline for new capital rules.
Gold for December delivery ended up 60 cents, or 0.1%, at $1,247.10 an ounce on the Comex division of the New York Mercantile Exchange. Earlier, gold had fallen as low as $1,242.30 an ounce. The SPDR Gold Trust (GLD 121.61, -0.01, -0.01%) slipped 4 cents to $121.69.
Silver closed up 31 cents, or 1.5%, to $20.15 an ounce, the highest close for a most-active contract since March 14, 2008, according to FactSet Research.
Gold’s modest advance in choppy trade came as investors bid up stocks and industrial commodities, including oil and copper, on refreshed optimism over the pace of the global economic recovery.
During the weekend, China reported that industrial production rose nearly 14% in August from the prior year. See related story on Asian markets.
Plus, global bank regulators, through the Basel Committee on Banking Supervision, announced new capital rules that weren’t as stringent as some feared. The rules will be implemented over several years. See related story on Basel rules.
Industrial metals rallied. Copper for December delivery gained 7 cents, or 2.1%, to $3.479 a pound. December palladium closed up $9.95, or 1.9%, to $529.80 an ounce. Platinum for October delivery rose $7.40, or 0.5%, to $1,549.90 an ounce.
U.S. stocks surged, led by rallying banks, though gains moderated midday. The Dow Jones Industrial Average (DJIA 10,544, +81.36, +0.78%) recently traded up 34 points, and the S&P 500 (SPX 1,122, +12.35, +1.11%) advanced 0.7%, with all but two sectors higher. Read Market Snapshot for more on U.S. stocks.
The U.S. dollar dropped, with the dollar index (DXY 81.87, -0.82, -0.10%) slipping just below 82, down 0.8% for the session. The dollar has tended to benefit from a bleaker economic outlook and has weakened when investors cycle into higher-yielding currencies such as the euro and Australian dollar. See Currencies for more on dollar, euro.
A weaker dollar typically makes investments seen as alternative stores of value — particularly precious metals — worth more. But analysts said it will likely take a bigger event, such as a reprisal of the sovereign debt worries that shook financial markets in May and June, to push bullion to new levels.
“I’m looking to see how [gold] reacts when it meets the test at the $1,260 level,” said Doug Keller, a principal at Harvest Capital Services in Floral Park, N.Y.
It will be important to see whether gold can break through that level in heavy volume, and remain above it during a pullback, he said.
After hitting a record closing high just below $1,260 an ounce last week, gold has lost about $10.
“Gold has significant resistance near old highs. As we get closer to $1,260, everyone sells,” said Leonard Kaplan, president of Prospector Asset Management in Evanston, Ill.
Earlier in Monday’s session, gold had declined alongside the U.S. dollar as investors fled safe-haven investments.
“Gold and the dollar have fallen as risk appetite has returned due to the Basel III regulations and the positive economic data out of China,” wrote analysts at Goldcore.
Prices were supported, however, by strong physical demand due to India’s festival season, said analysts at Action Economics.
In the autumn, gold often gets a boost from solid consumer demand in India during the country’s festival and wedding season.
Last week, gold prices fell 0.4%, with investors drawn to equities and other investments seen most likely to benefit from global growth.
Laura Mandaro is a MarketWatch editor, based in San Francisco.
Kate Gibson is a reporter for MarketWatch, based in New York.