Financial market jitters boost safe haven gold
LONDON (Reuters) - Gold rose to a four-month high above $970 an ounce on Monday as lingering fears of financial market instability and rising inflation boosted buying of the metal for its safe haven appeal.
Spot gold climbed $970.70 an ounce -- the highest since March 19 -- before easing to $968.15/$969.150 an ounce at 11:09 a.m. EDT from $963.00/965.00 late in New York on Friday.
Gold has soared since fears over the future of U.S. mortgage firms Fannie Mae FNM.N and Freddie Mac FRE.N came to the fore on Friday, dragging down equities and the dollar.
U.S. stocks slipped on Monday as investors worried that plans to shore up the government sponsored mortgage companies won't be enough to allay concerns about the fallout from the housing slump in the world's biggest economy.
"The issue of Fannie May and Freddie Mac's stability definitely brought the fear factor back," said Daniel Hynes, metals strategist at Merrill Lynch.
"A month ago, gold looked like it might have struggled to get back towards $1,000 but it now looks like it could be heading back towards those levels."
Gold dipped earlier on Monday after a firmer tone in the U.S. dollar encouraged pockets of profit-taking. However the dollar later retreated as stocks fell.
Oil prices above $146 a barrel were also supporting gold, as many investors use the precious metal to hedge against fuel-led inflation.
Bullion held by the New York-based SPDR Gold Trust (GLD.P) GLD.A, the world's largest gold-backed exchange-traded fund, jumped to a historic high of 705.90 tonnes on Friday amid nervousness over Fannie Mae and Freddie Mac.
Investment bank UBS on Monday raised its short-term gold price forecast to $1,000 an ounce over the next month, against a previous forecast for $900, citing heightened risk aversion and ETF holdings.
Gold hit a record above $1,000 per ounce in March on a combination of historic dollar weakness, rising oil prices and widespread financial market fears in the wake of the near collapse of Bear Stearns.
Commerzbank trader Michael Kempinski said gold could be heading back towards $1,000 an ounce.
"The general direction is to the upside at the moment, with the dollar still weak, oil at record highs and safe haven buying increasing. We see resistance at $990, but if oil continues to move higher I see it pushing through."
However, slowing physical demand from jewellers in response to higher prices continues to weigh on gold, with Turkish gold exports on Monday reported to have fallen by 25.5 percent to 5.8 tonnes in June.
Spot platinum rose to $2,0085.00/2,028.00 an ounce from $2,023.00/2,043.00 late in New York on Friday. Spot palladium eased to $446.50/454.50 an ounce from $448.50/456.50 an ounce.
Silver tracked gold higher to trade at $19.00/19.06 an ounce from $18.76/18.84 late in New York on Friday.
(Editing by David Evans)
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