early losses to hit a contract all-time high on Monday as
flight-to-quality demand due to credit market jitters more than
offset lower crude prices and a stronger dollar. "We have to ask ourselves if the credit problems that we
saw this summer had been remedied or not. If they haven't, we
could see more bids into gold. If the credit markets are
calming, then that will remove a bit (demand) from gold," said
James Steel, metal analyst at HSBC Plc in New York. Most-active December gold (GCZ7: Quote, Profile, Research) on the COMEX division of
the New York Mercantile Exchange settled up $2.30 at $810.80 an
ounce, after hitting a high of $814.20, a contract all-time
high. It hit a session low of $803.50 on Monday. Steel said that losses in the equity markets of late often
associated with flight-to-quality buying in gold, and that
reflected the precious metal's traditional values as a safe
haven. U.S. stocks dropped about 1 percent on Monday as Citigroup
Inc's (C.N: Quote, Profile, Research) warning of swelling loan losses fanned a sell-off
in financial services companies and investors worried about the
impact of the credit turmoil on the economy. Citigroup, the biggest U.S. bank by total assets, said it
could suffer an $11 billion write-down related to subprime
mortgage losses. Shares tumbled to 4-1/2-year lows.
[ID:nN05258480] At the same time, Steel said he noted a pick-up in gold
sales from the scrap and recycling markets as dealers took
advantage of the higher prices. However, the recent surge in gold prices could take a toll
on physical buying, Steel said. "The high prices are going to feed into the jewelry market,
and already we have seen declines in Indian and Middle Eastern
demand based on these high prices. And I think we are likely to
see that persist," Steel said. Global bullion demand is traditionally the strongest during
the fourth quarter because of the Indian and Muslim religious
festivals as well as the Christmas holiday shopping season. Meanwhile, silver also finished sharply higher. COMEX
December silver (SIZ7: Quote, Profile, Research) closed up 18.60 cents or 1.3 percent at
$14.785 an ounce, trading between $14.460 and $14.880. Stephen Briggs, metals analyst at Societe Generale in
London, told clients in a note that silver's recent sharp rally
was largely driven by investor and speculator interest and it
could not be easily sustained above $14 an ounce without
further strength in gold. Briggs added that the correlation between gold and silver
prices had been 93 percent since 2005. "There is a measure of froth in the silver market and that
if gold corrects as expected, then silver's fall, much as was
the case in July, may be much sharper than that of gold,"
Briggs said. COMEX estimated final volume at 104,952 contracts, and gold
options were estimated at 20,064 lots. Turnover in Chicago
Board of Trade electronic 100-oz gold futures was 19,697 lots
at 2:41 p.m. EST (1941 GMT) http://www.cbot.com/cbot/pub/page. Meanwhile, the Commodity Futures Trading Commission said in
its latest Commitment of Traders report that speculative net
long positions in gold futures rose to 198,606 lots in the week
up to Oct 30 compared with 186,304 in the week earlier.
[ID:nN0215211] News of strikes in gold mines in South Africa and Peru also
supported bullion. At 2:15 p.m., spot bullion
$808.80/809.60, compared with the Friday New York close at
$807.70/808.50. London bullion dealers fixed the afternoon spot
reference price at $804.75. COMEX December silver (SIZ7: Quote, Profile, Research) closed up 18.60 cents or 1.3
percent at $14.785 an ounce, trading between $14.460 and
$14.880. Spot silver
Friday's late New York quote of $14.58/14.63. London silver was
fixed at $14.49. NYMEX January platinum (PLF8: Quote, Profile, Research) ended up $3.80 at $1,466.50
an ounce. Spot platinum
an ounce. Spot palladium
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