Gold rises to 2-week high on central-bank hopes

Gold prices ended on a two-week high Tuesday fueled by expectations that central banks around the world will take more steps to spur economic growth. The European Central Bank is expected to lower interest rates on Thursday, a move that many expect other central banks to copy.

By Claudia Assis and Anna Andrianova
July 3, 2012, 2:07 p.m. EDT
Market Watch

SAN FRANCISCO (MarketWatch) — Gold futures on Tuesday ended at their best in two weeks, fueled by expectations central banks around the world will take more steps to spur economic growth.

Gold for August delivery GCQ2 -0.26% settled up $24.10, or 1.5%, at $1,621.80 an ounce on the Comex division of the New York Mercantile Exchange.

That countered mild losses Monday, when the contract fell 0.4% to close at $1,597.70 an ounce.

Investors “are coming to the conclusion that the time is right for [the European Central Bank] to lower interest rates,” said James Cordier, a portfolio manager with Optionseller.com in Florida.

There’s also some expectations an ECB move would be followed by similar stimulus moves by other central banks, he said.

The European Central Bank is expected to lower rates on Thursday, and China is expected to relax the minimum reserve requirement ratio for banks again, analysts at Commerzbank said in a note to clients Tuesday.

In addition, more is expected of the U.S. central bank after weak manufacturing data Monday, they said.

Also benefiting gold, the dollar turned modestly weaker, and oil and most industrial commodities, as well as equities, traded higher.

The ICE dollar index DXY -0.05% , which tracks the U.S. currency against its six major rivals, traded at 81.803, up from around 81.888 in late North American trading on Monday.

A stronger dollar is a negative for gold and raw-materials futures, as it makes them more expensive for holders of other currencies.

Elsewhere in the precious-metals complex, silver for September delivery SIU2 -0.23% rose 78 cents, or 2.8%, to end at $28.28 an ounce. September copper HGU2 -0.14% added 7 cents, or 2.1%, to $3.54 a pound.

Platinum and palladium also settled higher, with October platinum PLV2 -0.05% up $33.10, or 2.3%, at $1,491.40 an ounce. September palladium PAU2 0.00% gained $20.90, or 3.6%, to $598.90 an ounce.

Earlier Tuesday, the Commerce Department said U.S. factory orders rose 0.7% in May, well above expectations around an increase by 0.1%.

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