Gold hits 8-week high as dollar tumbles

GOLD PRICE: Yellow metal's price hits 8-week high, prompted by oil market rally and US dollar weakness. (Getty Images)

Gold rose to an eight-week high above $940 an ounce on Wednesday, bolstered by a rally in oil and the dollar's slide to its lowest level in nearly five months.

"Oil has reached the $60 mark. That is obviously a bellwether and a key for commodities in general, so gold is taking a cue from the strength in oil," said Brian Hicks, a portfolio manager at US Global Investors, which has more than $2 billion in assets under management.

The weakness of the greenback, which makes gold and other dollar-denominated commodities cheaper for non-US investors, sparked technical buying in the yellow metal, traders said.

US gold futures for June delivery settled up $10.70, or 1.2 percent, at $937.40 an ounce on the COMEX division of the New York Mercantile Exchange.

Oil jumped above $62 a barrel on Wednesday to a new six-month high on bullish US inventory data and supply concerns after a spate of refinery accidents.

Gold mining stocks, measured by the Gold BUGS (basket of unhedged gold stocks) index, rose over 5 percent on gold's strength and an initial Wall Street rally.

"I think we are in for a period of stronger margins for gold stocks," Hicks said. "You will see a re-rating of key names, like Newmont and Barrick, as we get more buying from generalists who have not participated in the gold market."

Gold demand rose 38 percent in the first three months of 2009, according to the World Gold Council (WGC), an industry-sponsored trade group, as rising investment offset weaker jewelry and industrial usage.

WGC investment research manager Rozanna Wozniak told Reuters television she expects investment demand for gold to remain firm as investors seek a safe store of value for their money.

"I have some concerns over how long these green shoots (of recovery) will last," Wozniak said. "I think overall the uncertainty is going to remain for a while yet."

Meanwhile, platinum and palladium, mainly used by carmakers as components in autocatalysts, firmed, helped by rising gold prices and upbeat sentiment as traders, refiners and miners met for London's Platinum Week.

US President Barack Obama's long-term plan for cleaner auto emissions boosted platinum's appeal as an auto catalytic converter to clean exhaust fumes, analysts said.

Platinum was at $1,145 an ounce, up 0.7 percent from its late Tuesday quote of $1,137.50 late in New York, while palladium was at $231.50 an ounce, just a tad higher than its previous finish of $231.

Silver was at $14.28 an ounce, up 0.9 percent from its previous finish of $14.15. (Reuters)

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