Gold rises after Moody's U.S. credit warning hits dollar

NEW YORK/LONDON Wed Sep 12, 2012 1:09am IST

Gold bars are pictured at the Austrian Gold and Silver Separating Plant 'Oegussa' in Vienna August 26, 2011. REUTERS/Lisi Niesner

Gold bars are pictured at the Austrian Gold and Silver Separating Plant 'Oegussa' in Vienna August 26, 2011.

Credit: Reuters/Lisi Niesner

NEW YORK/LONDON (Reuters) - Gold rose toward a six-month high on Tuesday as the dollar fell following a warning by Moody's Investors Service on U.S. creditworthiness while gold exchange-traded products were in demand by investors.

The metal received a boost after credit rating agency Moody's said the United States may lose its "triple-A" debt rating if next year's budget negotiations do not produce policies that decrease debt.

Gold investor sentiment was already bullish after last week's disappointing U.S. payrolls data raised hopes that the Federal Reserve could unveil new stimulus as early as Thursday at its policy meeting.

"Every piece of bad news seems to be good for gold, only because it translates into something that the Fed has to do to get this economy off the ground," said Anthony Neglia, president of Tower Trading and a COMEX gold options floor trader.

Heavy positioning in COMEX December calls at strike prices above $1,800 an ounce suggests that many investors believe gold could rise further by the end of the year, Neglia said.

Spot gold was up 0.4 percent at $1,731.66 an ounce by 2:55 a.m. EDT (1855 GMT). The price has risen 2.5 percent so far in September to hover near its highest in six months.

U.S. gold futures for December delivery settled up $3.10 at $1,734.90 an ounce, with trading volume currently at about 40 percent below its 250-day average, preliminary Reuters data showed.

Silver rose 0.3 percent to $33.39 an ounce.

Gold also benefits from rising expectations that a German court will back the euro zone bailout fund, even though it also means that any hitch could unleash sharp moves in stocks, bonds and the euro, traders said.

U.S. gold futures open interest, which measures the total number of long and short outstanding contracts, is at a six-month high.

"Rising open interest means lots of funds are back in the market with nervous positions that could result in heavy selling if the market is disappointed by events this week," said George Gero, vice president of RBC Capital Markets.

INVESTMENT BUYING STRONG

Holdings of bullion in exchange-traded products (ETPs), often used as a gauge of investor appetite for gold, rose by 91,932 ounces on the day to a record 72.49 million ounces, following broad-based inflows into most major ETPs.

UBS strategist Edel Tully said in a note that strong buying in gold ETPs has helped offset worries that investors might take profit following a sharp increase in bullish bets in U.S. gold futures by hedge funds and money managers.

Among platinum group metals, platinum climbed 0.6 percent to $1,597.90 an ounce, while palladium was up 0.5 percent at $666.22 an ounce.

(Editing by Marguerita Choy and Alden Bentley)

Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared
Sensex surges over 300 points on energy reforms, state elections

Sensex surges over 300 points on energy reforms, state elections

The BSE Sensex surges over 300 points and the Nifty gains nearly 100 points after the government's energy reforms lead to a rally in energy firms, while wins by Prime Minister Narendra Modi's party in two state elections raise expectations for additional reforms.  Full Article 

REUTERS SHOWCASE

Indian State Media

Indian State Media

Controlling the message: Modi chooses state media  Full Article 

ONGC Stake

ONGC Stake

Govt meeting bankers to discuss share sale in ONGC - source  Full Article 

Gold Curbs

Gold Curbs

Finance Ministry wants to reimpose curbs on gold imports - ET  Full Article 

World Stocks

World Stocks

Shares advance on strong data, earnings  Full Article 

Eyeing Reebok

Eyeing Reebok

Investor group aims to buy Reebok unit - WSJ  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device.  Full Coverage