Gold stages comeback with aid of weak dollar

Wednesday, 28 September 2011 00:00 - - {{hitsCtrl.values.hits}}

SINGAPORE (Reuters) - Spot gold rallied more than 1 percent and U.S. gold futures as much as 4 percent on Tuesday, snapping four consecutive sessions of losses as a weaker dollar helped battered commodities stage a comeback.

Euro-zone officials are working to magnify the firepower of the region’s rescue fund, European Central Bank policymakers said on Monday, boosting hopes the region will be able to staunch a sovereign debt crisis that threatens the world economy.

The news pushed the dollar down 0.5 percent against a currency basket, making gold cheaper for holders of other currencies.

Spot gold gained 1.5 percent to $1,651 an ounce by 0708 GMT, after sinking as much as 7 percent to a 7-1/2-month low near $1,530 on Monday.

U.S. gold rose 3.7 percent to $1,653, headed for its biggest one-day rise since March 2009.

“In the last couple of days the market over-reacted to the situation in the euro zone and the U.S.,” said Cameron Alexander, senior metals analyst at GFMS, a unit of Thomson Reuters.