Dollar drop, Iran tensions boost goldDecember gold futures rise above $1,160 an ounce
FRANKFURT (MarketWatch) -- Gold futures rallied to a new high on Monday, as dollar weakness as well as escalating tensions between Iran and the west boosted gold's appeal as a safe-haven asset and a hedge against inflation.
The precious metal is extending its winning streak into a seventh session.
Gold for December delivery, the most actively traded contract, climbed as high as $1,167.80 an ounce on Globex.
The contract was last up $19.40, or 1.7%, to $1,166.20 an ounce.
The dollar declined against its rivals after Federal Reserve Bank of St. Louis President James Bullard said Sunday that the U.S. central bank should continue buying mortgage-backed securities and other assets longer than currently planned. Read more.
Bullard's comments are "the main reason why the dollar is under pressure this morning," and that in turn is boosting gold prices, said Carsten Fritsch, commodities analyst at Commerzbank AG. "It's an indication that a Fed rate hike may come later than expected," Fritsch said. "And also rising money supply undermines the dollar." Gold and the dollar have a very strong inverse relationship: When the dollar falls, gold prices tend to rise.
Iran tensions escalate Rising tensions between Iran and the west are also buoying gold's status as a safe-haven asset, according to Fritsch.
Iran started on Sunday five days of large-scale war games aimed at defending its nuclear sites in case of attack, the BBC reported on its Web site. An Iranian official said that if his country is attacked by Israel, it will respond by launching a missile strike against Tel Aviv, according to the report. Western nations have put strong pressure on Iran to give up its nuclear program, but Iran has insisted the program is for peaceful purposes.
http://www.marketwatch.com/story/gold-hits-fresh-high-as-dec-contract-tops-1160-2009-11-22
