Gold hits five-month high, despite dollar rally

08:44, May 04, 2010      

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Gold futures on the COMEX Division of the New York Mercantile Exchange extended a rally to five-month high on Monday as concerns remained about Greek government's ability to comply with the austerity plan and the fiscal health of other Eurozone members. Silver surged, but platinum dropped.

The most active gold contract for June delivery rose 2.6 U.S. dollars, or 0.2 percent, to finish at 1,183.3 dollars.

EU and IMF agreed over weekend on a 110-billion-euro emergency loan in exchange for budget cuts to help Greece avoid defaulting on its debt, after Greece's debt rating was cut to junk status and its borrowing cost ballooned last week.

Although markets welcomed the news at first, but new questions were introduced, Investors worried whether Greece could bear the harsh budget-cutting measures, and the Greek debt crisis may quickly spread to other fiscally precarious European countries and slowdown the economic recovery of Europe. The continued fear over the sovereign-debt crisis supported gold price as investors flocked to gold in a flight to safe-haven, and sent it to reach 1, 188.40 U.S dollars, the highest level for a most-active contract since Dec. 4.

Strong U.S economic data indicated broad improvements in U.S. economy, and raised investors' expectation that Federal Reserve may hike interest rates later this year, which kept a lid on gold price, since interest rate rise would increase the opportunity cost of holding gold. Meanwhile, the rally in the U.S. dollar on Monday has also put downward pressure on gold.

July silver rose 20.1 cents to 18.84 dollars per ounce. July platinum was down 16.2 dollars to 1,728.9 dollars an ounce.



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