September 11, 2012 / 9:48 AM / 7 years ago

PRECIOUS-Gold rises after Moody's US credit warning hits dollar

* Gold extends gains after dollar falls on credit warning
    * Heavy bets on US gold calls with higher strikes seen
    * Sell-off possible on disappointment over Fed, stimulus
    * Coming up: German constitutional court ruling at 0800 GMT

 (Updates comment, market activity)
    By Frank Tang and Amanda Cooper
    NEW YORK/LONDON, Sept 11 (Reuters) - Gold rose toward a
six-month high o n T uesday 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.
    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.
 2:55 PM EDT     LAST/    NET   PCT      LOW    HIGH  CURRENT 
               SETTLE   CHNG  CHNG                       VOL 
 US Gold DEC   1734.90   3.10   0.2  1728.00 1740.50   97,099 
 US Silver SEP  33.509 -0.065  -0.2   33.420  33.765       69 
 US Plat OCT   1607.00   3.20   0.2  1588.80 1612.50    5,685 
 US Pall SEP    674.40   2.15   0.3   668.80  675.30       26 
 Gold          1731.66   6.87   0.4  1726.33 1737.80         
 Silver         33.390  0.090   0.3   33.360  33.810 
 Platinum      1597.90   8.90   0.6  1591.00 1607.99 
 Palladium      666.22   3.32   0.5   669.52  676.00 
 TOTAL MARKET              VOLUME          30-D ATM VOLATILITY 
               CURRENT   30D AVG  250D AVG   CURRENT     CHG 
 US Gold        104,586   135,072   182,221     19.45    0.04 
 US Silver       35,577    52,994    53,246     31.87    1.34 
 US Platinum      6,163    16,098     9,269     20.93    0.13 
 US Palladium     2,961     7,627     4,653                  

 (Editing by Marguerita Choy and Alden Bentley)
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