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Gold prices settle 2% higher on Mideast tensions

AP

Gold rose to a near two-month high on Thursday, gaining nearly 2.5 percent as a drop in the U.S. dollar triggered short-covering and a technical breakout once prices breached key resistance at $1,350 an ounce.

Silver climbed almost 6 percent to extend its winning streak to a seventh session. Platinum and palladium also rose sharply.

After trading lower earlier in the session, gold staged an impressive $50 rally as the dollar reversed gains after data gave conflicting pictures of the strength of the U.S. economic recovery, muddying views on when the U.S. Federal Reserve will begin trimming its stimulus measures.

Speculators, who have boosted their short position on gold since its mid-April sell-off, opted to buy futures to cover their bearish bets as gold rose above the $1,350 mark, an area bullion attempted to breach several times in the past two months but failed each time.

"Today's move was mostly driven by technicals, and that spooked the bearish bets out of the gold market," said Axel Merk, chief investment officer at California-based Merk Funds, which manages about $500 million of currency mutual-fund assets.

Spot gold was up 2.3 percent at $1,365.60 an ounce, having hit $1,369.40, its highest level since June 19.

U.S. gold futures for December settled up $27.50 at $1,360.90 an ounce, with trading volume less than 20 percent above its 30-day average, preliminary Reuters data showed.

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