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By Frank Tang and Jan Harvey
NEW YORK/LONDON, June 16 (Reuters) - Gold ended higher on Monday
as the dollar fell in the wake of weaker than expected U.S.
manufacturing data and more hawkish comments from the European
Central Bank, increasing bullion's appeal as an alternative
currency.
Silver prices jumped more than 5 percent, tracking gold, to a
session high of $17.40 an ounce.
Gold <XAU=> was last at $883.60/884.80 by New York's last quote
at 2:45 p.m EDT (1845 GMT) an ounce, up from $869.00/870.00 an ounce
late in New York on Friday. Earlier it spiked to a session high of
$894.70, up 3 percent.
The U.S. gold contract <GCQ8> for August delivery on COMEX
division of the New York Mercantile Exchange settled up $13.20, or
1.5 percent, at $886.30 an ounce.
"This is on the dollar movement," said Commerzbank senior
precious metals trader Michael Kempinski. "It looks like we have
broken out of the upside channel."
A rally in crude prices to a fresh record high in New York on
dollar weakness and as distillate futures strengthened also helped
buoy gold, which is often bought as a hedge against oil-led
inflation. []
However, oil's initial gains fizzled and U.S. crude futures
<CLc1> ended down 25 cents at $134.61 a barrel.
Zachary Oxman, senior trader at Wisdom Financial in Newport
Beach, California, said that gold could promptly rise above the $900
an ounce level in the near term based on positive fundamental
factors related to the currency and energy market movements.
"I wouldn't say the rally was at all dead over the last couple
of months. I see it more as a short-term breather," Oxman said.
The dollar's slide is benefiting a range of commodities, as
dollar-priced assets such as oil and the metals become cheaper for
holders of other currencies. Gold, which is also bought as a
currency hedge, is taking particular support from its slip.
Last week the U.S. currency posted its best week in three years
against a basket of currencies, pressuring gold to its lowest level
since May 2 on Thursday.
However, the dollar is suffering on Monday from the double blow
of weaker-than-expected U.S. manufacturing data and rising
expectations of a euro zone rate rise after record inflation data
from the area. []
U.S. data today showed a sharper than expected contraction in
manufacturing activity in New York state.
On the other side of the Atlantic, expectations for a euro zone
rate hike were boosted by comments from European Central Bank
governing council member Nout Wellink that keeping inflation under
control was the ECB's top priority.
His comments came after euro zone inflation data spiked to a new
record of 3.7 percent year-on-year in May, according to data
released Monday.
With attention increasingly turning to inflation as oil prices
rally to new highs despite news of a production increase from Saudi
Arabia, the outlook for the precious metal remains positive, traders
said.
"Gold is starting to find its own feet in an inflationary
environment, and over a longer period of time should outperform most
other commodities," said Simon Weeks, director of precious metals
trading at the Bank of Nova Scotia.
Silver <XAG=> was tracking gold higher, rising by more than 5
percent to its session high before settling back to trade at
$17.16/17.22 an ounce from $16.48/16.56 late in New York on Friday.
Among other precious metals, spot platinum <XPT=> rose to
$2,038.50/2,058.50 an ounce from $2,023.50/2,043.50 late in New
York.
Spot palladium <XPD=> climbed to $457/465 an ounce from
$445.50/453.50.
(Editing by Marguerita Choy)
