Frank Tang and Julie Crust
Tuesday, October 4, 2008
NEW YORK/LONDON (Reuters) – Gold rose 5 percent on Tuesday as investors ditched the dollar and moved to commodities and stocks, relieved that the U.S. presidential election would end the uncertainty of the long campaign.
“A recovery of oil prices due to the Saudi (output) cut, a more optimistic equity outlook and easier credit have certainly triggered demand for gold,” said James Steel, chief commodity analyst of HSBC.
Spot gold was at $756.80 at 2:51 p.m. EST, 4.8 percent higher than Monday’s close of $722.35.
U.S. futures for December delivery settled up $30.50, or 4.2 percent, at $757.30 an ounce on the COMEX division of the New York Mercantile Exchange.
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Benchmark light sweet crude oil futures settled more than 10 percent higher at over $70 per barrel on signs that Saudi Arabia had made substantial cuts in crude exports and stronger financial markets.
Bullion was also supported by signs that a global recession seemed averted for the moment. U.S. stocks were 3 percent higher in afternoon trade.
The dollar endured its biggest one-day drop against a basket of currencies in 13 years with investors betting global interest rate cuts, which typically would boost the U.S. currency, will stimulate growth and alleviate the global financial crisis.
A win by Democrat Barack Obama, who leads Republican John McCain in most polls, would be marginally better for the dollar in the longer term, analysts said.
“The U.S. election might have an impact on the euro/dollar and so indirectly would have an impact on gold as well,” said Eugen Weinberg, an analyst at Commerzbank.
Expectations of further interest rate cuts this week by major central banks also boosted gold.