Gold rises as dollar stumbles in global market

Gold futures remain sharply higher after hitting their highest level in a month Monday due to the U.S. dollar’s lowest level against the euro in three weeks,  as signs of improved Chinese oil demand and comments from a Federal Reserve official that U.S. interest rates would stay low pressured the dollar.

Around 10:54 a.m. EST (1554 GMT), lightly traded but nearby January gold is $20 higher at $1,158.20 an ounce on the Comex division of the New York Mercantile Exchange, while most-active February climbed $20.10 to $1,159 and peaked overnight at $1,163, its most muscular level since Dec. 8.

“It’s about the dollar and the very strong Chinese trade data,” said Frank Lesh, broker and futures analyst with FuturePath Trading.

The euro has been as high as $1.4558 against the dollar, its strongest level since Dec. 16 and up more than 1 cent compared to $1.4414 late Friday. Investors often buy gold as a hedge against dollar weakness. Furthermore, a softer greenback makes all dollar-denominated commodities cheaper in other currencies and thus can help demand.

The dollar remains undercut by a softer-than-forecast U.S. jobs report Friday.

“We have dollar weakness because the employment data pushed any thoughts of any [Federal Reserve] rate hikes out further,” Lesh said. “So we lost some dollar support and that, of course, is supportive for gold.”

Currency analysts also said a 17.7% rise in Chinese exports last month added to the pressure on the dollar.

“We also had very strong Chinese import data,” Lesh said. “That shows, as of right now, the appetite for commodities remains pretty strong.”

China’s imports rose nearly 56% last month. This improved demand picture has helped a number of commodities, Lesh continued.

Gold took off at “warp speed” as soon as overnight screen trading began late Sunday, said Jon Nadler, senior analyst with Kitco Metals. The report showing what he termed a “commodities shopping spree” in China triggered a return of risk appetite.

The overnight surge in gold was accelerated by buy stops, or pre-placed orders triggered when certain chart points are hit, said Matthias Detremmerie, founder and precious metals analyst at Goldessential.com. In fact, he said, when electronic trading opened Sunday night, it took only seconds for the market to break above Friday’s high of $1,140 in February gold and more buy stops were hit around $1,143.50.

Short covering was triggered, in which traders buy to exit positions in which they previously sold, Detremmerie continued.

Most-active March silver is up 32 cents to $18.79 an ounce and hit a high of $18.925 that was its strongest level since Dec. 4.

Meanwhile, April platinum is up $24.90 to $1,595.50 an ounce and hit a life-of-contract high of $1,596.20, while March palladium is up $5.85 to $431.