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Some bargain buying and indications of mounting physical demand in Asia and the U.S. also contributed to gains.
On the Comex division of the New York Mercantile Exchange, gold futures for June delivery traded at USD1,427.95 a troy ounce during U.S. morning hours, up 2.3% on the day.
Comex gold prices rose by as much as 3% earlier in the session to hit a daily high of USD1,438.35 a troy ounce, the strongest level since April 15. Comex gold fell to a 27-month low of USD1,322.25 an ounce on April 16.
Gold prices were likely to find support at USD1,322.25 a troy ounce, the low from April 16 and near-term resistance at USD1,440.10, the high from March 7, 2011.
Gold's gains accelerated after breaking above a key technical resistance level close to the USD1,420-level and then the USD1,428-level, triggering a flurry of automatic buy orders.
Some bargain buying also contributed to gains, as investors returned to the market to seek cheap valuations amid speculation prices fell too far too fast. Gold futures lost 5.4% last week, the fourth consecutive weekly decline.
Prices of the precious metal are now down almost 25% since hitting an all-time high of USD1,920.80 an ounce in September 2011, sparking fears that gold’s bull run is coming to an end.
Sentiment on the precious metal was dampened amid concerns the Federal Reserve will end its bond-buying program sooner-than-expected.
News that Cyprus was to sell some of its gold reserves to raise funds for its bailout also weighed on sentiment, as it sparked concerns other debt-ridden European governments would be forced to do the same.
The steep decline in gold prices sparked a rush of physical buying from buyers in Asia and the U.S.
The U.S. Mint has sold 167,500 troy ounces of gold coins so far in April, up almost three-fold from the 62,000 troy ounces the Mint had sold in all of March.
Buying interest also improved in top consumers India and China, according to bullion dealers.
Elsewhere on the Comex, silver for May delivery rallied 2.4% to trade at USD23.51 a troy ounce, while copper for May delivery slumped 0.5% to trade at USD3.134 a pound.
Courtesy : Investing.com