Gold rises 1% as dollar retreats

Gold rose for a second day yesterday, rebounding from last week’s five-and-a-half year low, as a retreat in the dollar prompted investors to cover short positions ahead of a European Central Bank meeting and US payrolls data this week.

The dollar slid from an eight-and-a-half month high as the euro bounced back, with traders judging that a significant amount of further monetary easing had already been priced into the single currency ahead of tomorrow’s ECB meeting.

Spot gold was up 0.5 per cent at $1,069.00 an ounce at 1023 GMT, while US gold futures for February delivery were up $2.90 an ounce at $1,068.20. The metal hit its lowest since February 2010 last week at $1,064.46.

Gold posted its biggest monthly drop in two-anda-half years in November, falling 7 per cent as investors positioned for a US rate hike this month. Rising rates are expected to increase the opportunity cost of holding non-yielding bullion, while boosting the dollar.

Data from the US Commodity Futures Trading Commission showed on Monday that hedge funds and money managers added to their net short position in COMEX gold contracts in the week to November 24.