* Funds cover record shorts, likely to remain bearish
* Gold breaks above 50-day daily average
* India takes more steps to cut gold imports
* Coming up: U.S. Richmond Fed manufacturing index Tuesday
(Adds market details, comment, updates prices)
By Frank Tang and Jan Harvey
NEW YORK/LONDON, July 22 Gold surged 3 percent
and hit a one-month high on Monday, vaulting back over a
technical threshold at $1,300 an ounce as speculators fearing a
reversal of the recent downward price trend rushed to buy back
It was the gold's heftiest one-day gain in 13 months and its
three-day rally is the biggest in almost two years. Also
contributing was heavy short covering as futures investors
anticipating the start of delivery period on August contracts
rolled positions from August to December. The first day for
delivery notices is July 31.
"With more shorts being built over the last couple of
months, it's not surprising to see that the shorts have to cover
their positions with the increase of prices," said Carlos
Sanchez, director of commodities and asset management at CPM
Technical buying helped bullion to hold onto its gain after
spot gold ended above its 50-day moving average for the first
time since November 2012.
However, possible renewed bearish bets by funds combined
with India's tightening gold import rules suggest bullion prices
could come under pressure, analysts said.
Spot gold was up 3 percent at $1,334.31 an ounce by
3:35 p.m. EDT (1935 GMT), after hitting a high of $1,338.91, its
loftiest price since June 20.
U.S. gold futures for August delivery settled up
$43.10 an ounce to $1,336, with trading volume about 15 percent
above its 30-day average, preliminary Reuters data showed.
Silver rallied 5.4 percent to $20.51.
Gold has now rallied of 4.6 percent since Thursday, its
biggest three-day gain since October 27, 2011.
Last week, gold posted its second consecutive weekly gain
after Federal Reserve chief Ben Bernanke assured investors that
the U.S. central bank will be careful in scaling back economic
stimulus, which slashed U.S. interest rates after the financial
crisis and raised interest in gold investments.
The market is still down 23 percent this year and languishes
in bear territory. Speculators added almost 2,000 contracts to
what was already a record net short position totaling over
80,100 lots in the week to July 16, a report by the Commodity
Futures Trading Commission showed on Friday.
Even so, given the size of the short position and signs of
prices steadying from months of heavy selling, rallies would not
be a surprise if investors move to cover shorts, dealers said.
Analysts have slashed their 2013 gold and silver price
forecasts after sharp falls earlier this year and expect them to
remain weak in 2014 as the United States reins in monetary
stimulus, a Reuters poll showed on Monday.
INDIA TIGHTENS GOLD IMPORTS
India's central bank moved to tighten gold imports again on
Monday, making them dependent on export volumes with an eye to
reducing a record current account deficit. India, the largest
gold consuming country, offered relief to domestic sellers by
lifting restrictions on credit deals.
"From a personal standpoint, I find it hard to see how the
Indian gold market will weather these restrictions," said Rhona
O'Connell, head of metal research and forecast at Thomson
Among other precious metals, platinum rose 1.4
percent to $1,443.75 an ounce, while palladium eased 0.1
percent to $743.97.
4:27 PM EDT LAST/ NET PCT LOW HIGH CURRENT
SETTLE CHNG CHNG VOL
US Gold AUG 1336.00 43.10 3.3 1295.40 1339.10 183,821
US Silver SEP 20.509 1.049 5.4 19.495 20.575 48,605
US Plat OCT 1448.00 16.80 1.2 1430.50 1456.40 7,404
US Pall SEP 750.45 0.70 0.1 745.00 754.00 3,239
Gold 1334.31 38.57 3.0 1296.95 1338.91
Silver 20.510 1.050 5.4 19.570 20.600
Platinum 1443.75 20.25 1.4 1433.25 1452.50
Palladium 743.97 -0.53 -0.1 748.00 752.04
TOTAL MARKET VOLUME 30-D ATM VOLATILITY
CURRENT 30D AVG 250D AVG CURRENT CHG
US Gold 232,273 197,226 179,644 21.77 0.30
US Silver 52,082 64,873 56,507 28.4 -0.84
US Platinum 7,564 15,305 13,082 25.11 -0.89
US Palladium 3,279 4,368 5,466
(Editing by Phil Berlowitz and Alden Bentley)