Gold and Silver surge over 3% as haven bid restored

 

From Reuters:

Gold prices roared to one of the biggest one-day rallies in years on Tuesday, as euro zone jitters and gloomy U.S. consumer data rekindled a dormant safe-haven bid and triggered a flurry of technical buying.

After several months of trading largely in sync with riskier assets, gold raced more than 3 percent higher even as stock markets sank, cruising toward its best three-day run since a sharp fall in early August and reaching its highest price in more than a month. Silver soared 4 percent.

The rally coupled with the apparent return of gold's allure as a haven from uncertainty, instability and economic weakness emboldened some bulls, who have been sidelined through a month of range-bound trading. Strong buying related to a technical breakout and options expiry on Wednesday also aided bullion.

"Today is the first day since September that we are seeing real good technical and safe-haven buying," said Frank McGhee, head precious metals trader at Integrated Brokerage Services LLC.

Flight-to-quality buying reemerged after a flare-up over the European Central Bank and political turmoil in Italy kept the euro zone on edge on the eve of a European Union summit. But gold also appeared poised to win if leaders agree to "throw a load of money on the table", McGhee said.

Spot gold was up 3.2 percent at $1,705.24 an ounce by 2:38 p.m. EDT.

U.S. December gold futures settled up $48.10 at $1,700.40 an ounce. Trading volume was in line with its 30-day average.

Analysts said Tuesday's action was aided by a technical breakout as sizable buy orders from new investors emerged with heavy volume following a breach of strong resistance at around $1,660 an ounce.

More than 170,000 ounces changed hands for the December contract within a 10-minute timespan around 10 a.m. EDT after data showed U.S. consumer confidence unexpectedly fell this month to its lowest since March 2009.

McGhee said futures short-covering by option sellers also boosted prices ahead of Wednesday's COMEX November option expiration. The $1,700 November call has been a popular bullish option play, traders said.

"A lot of today's rally was new buying, and $1,668 was the breakout point that brought more bullish momentum in gold," McGhee said. "Short-sellers ended up with futures that they never thought they would have to worry about."......read on