Gold rallied 2 percent on Wednesday on guarded euro zone optimism. Gold's rally came as the US dollar backed off a two-year high against the euro and was also weaker against other major currencies. A weakened dollar usually supports metals prices as many see gold as an alternative to other currencies.
By Claudia Assis and V. Phani Kumar
July 25, 2012, 2:16 p.m. EDT
SAN FRANCISCO (MarketWatch) — Gold futures rallied 2% on Wednesday as some optimism regarding the euro zone’s debt crisis emerged.
Gold for August delivery GCQ2 -0.29% rose $31.90 to settle at $1,608.10 an ounce on the Comex division of the New York Mercantile Exchange. That was gold’s best finish since July 5.
Despite the pop on Wednesday, gold is likely to remain rangebound, likely trading between $1,575 an ounce and $1,630 an ounce, said James Moore, an analyst with thebulliondesk.com in the U.K.
Moore said he’s skeptical that Wednesday’s gains are the start of a substantial rally, as gold is likely to continue to look at currencies for clues.
Gold’s rise came as the U.S. dollar backed off a two-year high against the euro and was weaker against major currencies.
That followed comments from an European Central Bank member that the ECB could apply for a banking license.
The single currency also gained as a counterpoint to a weakened pound following disappointing gross domestic product numbers from the U.K., Moore said.
The ICE dollar index DXY 0.00% fell to 83.755, from 84.009 in late North American trading Tuesday, when it reached the two-year high after a report Greece would require additional debt restructuring.
ECB policy maker Ewald Nowotny was reported as saying he saw an argument that supported giving the European Stability Mechanism a banking license, a move that would give it access to funding from the ECB.
A weakened dollar tends to support prices of commodities, such as gold, that are benchmarked in the currency. For gold, it boosts the metal’s appeal as an alternative to currencies.
Gold lost $1.20 in a regular session in New York Tuesday after a choppy trading session.
Most metals futures tracked gold higher, with September silver SIU2 -0.60% up 66 cents, or 2.4%, to $27.47 an ounce. Copper also for September delivery HGU2 +0.21% reversed losses to climb 2 cents, or 0.6%, and settle at $3.37 a pound.
October platinum prices PLV2 +0.14% rose $12.80, or 0.9% to $1,399.40 an ounce, while sister metal palladium PAU2 +0.14% , for September delivery, rose $3.65, or 0.7%, to $565.25 per ounce.
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