Gold prices rose on Monday, shaking off an unusual and sudden tumble earlier in the session, with weakness on Wall Street extending bullion’s rally to a third consecutive session.
The benchmark S&P 500 stock index eased after data showed the pace of growth in the U.S. services sector slowed in December for a second straight month, while new orders for factory goods rebounded in November. A weaker dollar also helped boost gold.
Analysts said gold appeared to find support from equities’ losses at the beginning of 2014 following last year’s tumble in bullion prices and stock markets’ record runup.
“It could very well be funds reconfiguring where they stand in terms of gold positions after cutting them last year,” said Thomas Capalbo, a precious metals trader at Newedge, a brokerage in New York.
Spot gold was trading up 0.3 percent at $1,239.39 an ounce at 3:20 p.m. EST (2020 GMT), having earlier hit a one-week high of $1,248.30.
The yellow metal has now rallied 3 percent since the start of the year following its 28 percent loss in 2013, which was its worst annual performance since 1982.
U.S. gold futures for February delivery settled down 60 cents at $1,238 an ounce, trading in a choppy $35 range between $1,247.70 and $1,212.60.
Total trading volume was about 160,000 lots, about 20 percent below the 250-day average, preliminary Reuters data showed.
Unusually heavy trade volumes early in the New York session rattled U.S. gold futures, triggering a brief halt while temporarily sending bullion prices down by more than $30 an ounce, or about 3 percent, between 10:14 a.m. and 10:15 a.m. EST.
It was not immediately clear what sparked the volatility, which prompted gold traders to speculate the move was a result of a so-called fat-finger erroneous trade.
CME Group said “all trades stand and our technology performed as designed”.
Frank McGhee, head precious metals dealer at Chicago commodities brokerage Alliance Financial LLC, said some gold traders stood ready to sell after the unusual slide dented buying sentiment.
Traders will now focus on U.S. nonfarm payrolls and trade numbers on Friday for clues on the strength of the economic recovery.
Ben Bernanke, who steps down as head of the Fed at the end of January, gave an upbeat assessment on Friday of the U.S. economy in coming quarters, though he did temper the good news in housing, finance and fiscal policies by repeating that the overall recovery “clearly remains incomplete”.
Among other precious metals, silver was up 0.1 percent at $20.15 an ounce. Platinum rose 0.3 percent to $1,413, while palladium climbed 1.3 percent to $734.25.