PRECIOUS-Gold rises to 1-month high on options-related buying

Tue Jul 23, 2013 4:23pm EDT

* Technical support, falling U.S. dollar help lift gold
    * Late-session rally in thin summer volume - analysts
    * Short covering ahead of option expiry, first-notice day
    * Coming up: U.S. new home sales report Wednesday

 (Updates prices and adds trader comment)
    By Frank Tang and Jan Harvey
    NEW YORK/LONDON, July 23 (Reuters) - Gold rose to a
one-month high on Tuesday as speculators bought back bearish
bets ahead of an option expiry later this week after the metal
rallied further above a technical threshold at $1,300 an ounce
breached in the previous session.
    After mostly directionless earlier trade, bullion staged a
late-day rally in thin summer trading as a falling dollar
prompted funds, fearing a reversal of a downward trend, to cover
their short positions.
    "There are some options-related buying as traders cover
short positions in the options market, which adds to buying in
the underlying futures," said David Meger, director of metals
trading at futures brokerage Vision Financial Markets.   
    A sharp sell-off since mid-April has sparked growing
interest in using gold options to profit from increased
volatility. The open interest in U.S. Comex gold options rose to
a record high of more than 1.8 million contracts, CME Group
 said on Tuesday. 
    Spot gold was up 0.6 percent at $1,342.74 an ounce by
3:50 p.m. EDT (1950 GMT), after hitting a fresh one-month high
of $1,346.11. 
    Year to date, gold is still 20 percent lower after posting
an annual gain in each of the past 12 consecutive years.
    U.S. gold futures for August delivery settled down
$1.30 an ounce to $1,334.70, with trading volume around 5
percent above its 30-day average, preliminary Reuters data
shows. 
    Technical buying could help fuel gold's rally, analysts
said.
    "A hold above the 50-day moving average of $1,331 an ounce
on the spot market may have provided some support for bullion
prices," said James Steel, HSBC's chief metal analyst.
    On Monday, gold ended above the key chart resistance for the
first time since late January, Reuters data showed. 
    Analysts said the metal was also underpinned by short
covering as futures investors, anticipating the start of
delivery period on August contracts, rolled positions from
August to December. The delivery period begins July 31.
    
    ETF OUTFLOWS, INDIA IMPORTS EYED
    Outflows from gold ETFs, which issue securities backed by
physical stocks of bullion, have averaged 20 tonnes a week this
year, Reuters data shows. Investors say they want
to see outflows steady before buying back into gold.
    Consumption in the world's No. 1 gold buyer, India, is
expected to be cut by moves on Monday by India's central bank to
tighten gold imports, increasing the country's dependence on
exports. 
    Among other precious metals, silver was down 0.3
percent at $20.47 an ounce, having risen 5 percent on Monday.
Spot platinum inched up 0.1 percent to $1,442 an ounce,
while palladium 1 percent lower to $736.72 an ounce.
 3:50 PM EDT     LAST/    NET   PCT      LOW    HIGH  CURRENT
                SETTLE   CHNG  CHNG                       VOL
 US Gold AUG   1334.70  -1.30  -0.1  1325.60 1346.40  146,990
 US Silver SEP  20.254 -0.255  -1.2   20.080  20.595   34,339
 US Plat OCT   1443.10  -4.90  -0.3  1423.20 1454.00    9,824
 US Pall SEP    739.45 -11.00  -1.5   731.20  747.50    3,231
                                                               
 Gold          1342.74   7.70   0.6  1327.40 1346.11         
 Silver         20.470 -0.060  -0.3   20.140  20.600
 Platinum      1442.00   1.50   0.1  1426.00 1450.50
 Palladium      736.72  -7.28  -1.0   734.27  745.72
                                                               
 TOTAL MARKET              VOLUME          30-D ATM VOLATILITY
                CURRENT   30D AVG  250D AVG   CURRENT     CHG
 US Gold        199,136   196,174   179,627     21.48    0.07
 US Silver       38,650    62,368    56,491     30.66    2.26
 US Platinum      9,856    14,962    13,070     24.86   -0.25
 US Palladium     3,294     4,368     5,466                  
                                                               
    

 (Editing by Bob Burgdorfer and Grant McCool)
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