September 21, 2012 / 10:07 AM / 7 years ago

PRECIOUS-Gold holds gains after early rally toward 2012 high

* Gold up slightly for week, posts five-week rally
    * US gold futures' open interest hit one-year high again
    * Hedge fund manager's bullish call on gold ups sentiment
    * Coming up: U.S. Chicago, Dallas manufacturing indexes Mon.

 (Updates market activity)
    By Frank Tang
    NEW YORK, Sept 21 (Reuters) - Gold rose to within a whisker
of its 2012 high on Friday as  technical momentum and recent
stimulus efforts by major central banks around the world
prompted bullion investors to boost bullish bets.
    Bullion priced in euro terms hit a record high
earlier in the session, but gains were later pared by profit
taking. The metal posted a slim gain for the week for its fifth
consecutive weekly rise.
    A positive "golden cross" formed on technical charts and a
bullish call made by well-known hedge fund manager Ray Dalio for
gold ownership further fed market sentiment for bullion.
    Traders said heavy buying of call options at high strike
prices could extend the metal's recent rally as open interest in
U.S. gold futures hit a one-year high for a second straight day.
    "There are a lot of hedge funds that bought call options a
week or two ago. There have been big buyers after the Fed has
committed to the monetization of debt," said Jeffrey Sherman,
commodity portfolio manager at DoubleLine Capital LP which
manages $45 billion in assets.
    Investors have been aggressively buying short-dated call
options with the $2,000 an ounce strike price, Sherman said. 
    Spot gold was up 0.3 percent at $1,772.96 an ounce by
3:20 p.m. EDT (1920 GMT) after hitting a high of $1,787.20,
within reach of the 2012 high of $1,790.30. 
    U.S. COMEX gold futures for December delivery settled
up $7.80 at $1,778 an ounce, with trading volume surpassing its
250-day average, preliminary Reuters data showed.
   COMEX futures' open interest, which measures the total
outstanding long and short contracts, rose to a one-year high at
483,107 lots as of Thursday. Open interest of U.S. gold futures
has gained about 25 percent in the past 30 days. 
    New longs, or investors who recently bought futures at
higher prices, could lead to a spike in volatility if they opt
to abandon their losing bets in a gold pullback, traders said.
Next Tuesday's COMEX October expiration also increased
choppiness.
    
    MORE RALLY ON GOLDEN CROSS? 
    Earlier this week, gold's 50-day moving average (DMA) broke
above its 200 DMA, which marked a golden cross in technical
analysis, indicating bullion's intermediate and longer-term
momentum is getting increasingly bullish. 
(Golden cross graphic: r.reuters.com/tas72t)
    The previous long-lasting golden cross on bullion charts was
formed on Feb. 6, 2009, and gold prices had surged 11 percent in
the following 11 sessions.
    Prominent hedge fund manager Ray Dalio said investors should
benefit from gold ownership as a hedge against the adverse
effects of money printing by central banks.
    "I think gold should be a portion of every one's portfolio
to some degree because it diversifies the portfolio. It is the
alternative money," Dalio, who runs the $120 billion hedge fund
Bridgewater Associates, said on CNBC Television on Friday.
    Among other precious metals, silver inched down 0.1
percent at $34.57 an ounce. Platinum climbed 0.7 percent
to $1,631.75 an ounce, while palladium rose 1.1 percent
to $667.25.
 3:20 PM EDT     LAST/    NET   PCT      LOW    HIGH  CURRENT
                SETTLE   CHNG  CHNG                       VOL
 US Gold DEC   1778.00   7.80   0.4  1769.10 1790.00  168,352
 US Silver DEC  34.638 -0.044  -0.1   34.365  35.260   60,794
 US Plat OCT   1637.60  13.70   0.8  1623.80 1647.00   12,589
 US Pall DEC    671.55  10.45   1.6   661.15  678.45    3,277
                                                               
 Gold          1772.96   5.77   0.3  1767.01 1787.20         
 Silver         34.570 -0.020  -0.1   34.350  35.150
 Platinum      1631.75  10.75   0.7  1626.80 1642.74
 Palladium      667.25   7.15   1.1   663.50  675.25
                                                               
 TOTAL MARKET              VOLUME          30-D ATM VOLATILITY
                CURRENT   30D AVG  250D AVG   CURRENT     CHG
 US Gold        183,819   146,406   183,741     17.31   -0.25
 US Silver       65,496    57,663    53,514     29.16   -1.53
 US Platinum     18,371    18,609     9,341     23.58    0.12
 US Palladium     3,293     8,364     4,657                  
                                                               
  

 (Additional reporting by Jan Harvey in London; Editing by Bob
Burgdorfer and Sofina Mirza-Reid)
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