LONDON (Reuters) - Gold prices hit their highest since May 7 on Tuesday as the dollar slid to a seven-week low against the euro and stock markets rallied, while platinum hit 3-1/2 month highs as unrest simmered at a South African mine.
A breach of chart resistance for gold at $1,630 an ounce, which had held it in check from early June, sparked further technically driven buying, dealers said.
Spot gold hit a high of $1,641.20 an ounce and was up 1.1 percent at $1,638.20 an ounce at 1424 GMT. U.S. gold futures for December delivery were up $17.40 at $1,640.40.
“A break above $1,630 is very significant as we breach the June-July and early August range,” VTB Capital analyst Andrey Kryuchenkov said. “Buy orders were triggered, with the dollar index also slipping below support at 82, or early July lows.”
He added, “This is on speculation that the ECB will act. Peripheral bond purchases by the ECB are almost a done deal according to the broader market, which is euro supportive in the short run ... bullion as ever follows the cause, trading against the greenback.”
Greece’s prime minister will meet German Chancellor Angela Merkel, French President Francois Hollande and Eurogroup chief Jean-Claude Juncker this week to try and secure more funding from the European Union, International Monetary Fund and ECB.
European shares hit 13-month highs and the euro climbed on hopes that meetings on Greece’s future this week and new crisis plans being drawn up by the European Central Bank will soothe the euro zone debt crisis.
German government bonds fell on Tuesday as markets focused on the prospect that the ECB could buy debt to contain Spanish borrowing costs. <GVD/EUR> <MTG/FX>
Traders cited a story in British newspaper The Daily Telegraph, which said it could confirm earlier reports in German media that ECB experts were examining plans to effectively cap Spanish and Italian bond yields.
GRAPHIC-2012 asset returns: link.reuters.com/muc46s
GRAPHIC-2012 commod returns: link.reuters.com/faz36s
GRAPHIC-Gold/USD correlation: r.reuters.com/ryx52s
GRAPHIC-Gold/platinum ratio: link.reuters.com/xez92s
Platinum touched its highest since early May at $1,508.25 an ounce and was later bid at $1,492.25 an ounce, up 0.5 percent. Its recent rise has made it this year’s best performing precious metal, up more than 7 percent.
Platinum has been the biggest climber of the last seven days, up more than $120 an ounce week-on-week on Tuesday, after police killed 34 people after an outbreak of inter-union violence at a mine operated by Lonmin.
London-based Lonmin, the world’s third-largest platinum producer, on Monday extended its ultimatum for striking workers to return to duty to Tuesday morning. Workers continued to trickle in as the deadline expired.
The company said that 30 percent of the 28,000-strong workforce reported for work on Monday, with some shafts reporting a 60 percent attendance. It conceded that sacking 3,000 striking workers at its Marikana mine near Johannesburg, South Africa, could lead to more violence.
”We still suspect that platinum will likely have a hard time pushing past the $1,500 mark, especially if there is a marked easing of tensions,“ INTL FCStone said in a note. ”More importantly, prices could be vulnerable once an announcement is made that units are starting to flow out.
“We should find out more over the next 24 hours ... our charts are showing the complex at the top end of the trading range.”
Spot palladium, which also rode gold and platinum’s coat-tails to its highest since late June on Tuesday at $621.25, was up 2.2 percent at $616.75 an ounce.
Chinese platinum imports nearly doubled year on year in July, data from the customs authority showed on Tuesday.
Palladium imports fell 14 percent on the year, however, while silver imports fell 4 percent, the 22nd straight month of declines.
Silver was up 1.8 percent at $29.26 an ounce. Earlier it reached its highest since early June at $29.42 an ounce.
Reporting by Jan Harvey; editing by Keiron Henderson and Jane Baird