Gold closed higher in New York on Monday despite a strengthening dollar and weaker crude oil, as U.S. stocks rallied while platinum rose to a near-record high on robust investment demand.
Over last month or so, we've gone through periods when gold and stock prices were moving together. So, it's entirely possible that we are seeing another influence like that. That wouldn't be surprising at all, said Patrick Fearon, precious metals analyst of A.G. Edwards & Sons in St. Louis.
Gold fell in early sessions as the dollar rebounded and crude declined. But the metal recovered as the session went on. Most-active December gold on the COMEX division of the New York Mercantile Exchange settled up $4.10 at $754.10.
Spot gold rallied to $747.65 an ounce, its highest level since January 1980, before easing to $746.80/747.60 by 2:15 p.m. EDT (1815 GMT), against $742.40/743.20 late in New York on Friday.
The metal has hit new highs four times in less than two weeks.
U.S. stocks jumped, with both the blue-chip benchmark Dow Jones industrial average (.DJI: Quote, Profile, Research) and broad-based Standard & Poor's 500 index (.SPX: Quote, Profile, Research) up 1.5 percent.
Frank McGhee, head precious metals trader of Integrated Brokerage Services LLC in Chicago, said gold was undergoing consolidation early on Monday.
The one potential negative is that there is not a lot of physical, industrial gold moving, McGhee said.
McGhee said investment demand has driven gold's strength.
If we consolidate here for a bit, the cash (physical) market will catch up, he said.
In other bullion markets, August 2008 futures in Tokyo ended 28 yen per gram higher at 2,786 yen -- its loftiest level since 1985.
With no signs of the dollar ending its slide against major currencies, bullishness is ample. But this does not exclude the market from a near-term pull back, Pradeep Unni, analyst at Vision Commodity Services in Dubai, said.
John Reade, head of metals strategy at UBS Investment Bank said that speculators on U.S. futures exchanges had heavily added long trading positions and any sign of liquidation from them could easily trigger profit taking in gold.
Still, while the dollar remains weak and the credit crunch continues, further flows into gold could be seen. We continue to forecast gold at $750/oz in three months, he said in a note.
In news related to the official gold sector, Dominique Strauss-Kahn, the International Monetary Fund's future managing director, said central bankers do not appear to oppose sales of IMF gold. Strauss-Kahn was chosen last week to succeed Rodrigo Rato as IMF chief a month from now.
Gold experts had said that any proposal to sell IMF's gold reserves would need the approval of the United States, which holds more than half of the IMF's voting power and has consistently opposed gold sales.
Anglo American said it planned to sell 61 million ordinary shares in AngloGold Ashanti in a major step to cut its stake in the gold miner.
PLATINUM NEAR RECORD HIGHS
Spot platinum hit an intraday high of $1,391 an ounce and reached closer to last November's record high of $1,395. It was quoted at $1,390.70/1,397.70, versus New York's previous finish of $1,385/1,390.
Dealers noted a lack of physical buying, with Chinese consumers away during the week-long holiday which started on Monday. Investors also digested news that a Japanese automaker had developed a technology to cut platinum use.
Japan's Mazda Motor Corp said it developed the world's first car catalyst employing technology that slashed platinum and palladium use by up to 90 percent.
Platinum is a soft, ductile metal that is resistant to oxidation and high-temperature corrosion. Automakers have been hit by high metal prices and are looking for ways to reduce material use to save costs.
Silver was essentially flat compared with Friday's close of $13.71/13.76 an ounce in New York, while palladium gained to $354.80/358.80 an ounce, its highest since mid-August, from its prior finish of $343.00/348.00.
(Additional reporting by Lewa Pardomuan in Singapore)