Gold Follows Crude Higher

Firmer oil prices helped gold bounce Monday, despite a mixed dollar.

Rising tensions in the Middle East lifted oil higher as investors focused on the possibility of reduced energy supplies out of the Persian Gulf, especially if the dialogue with Iran breaks down. That led contract prices for October delivery of light sweet crude to lift to an intraday high $63.66 a barrel, before retreating to close at $63.56, up 11 cents.

An elevated price of oil is viewed by some as a primary driver of inflation. And since gold is seen as a reliable hedge against rising prices, it wasn't too much of a surprise that gold staged a mini rally.

It's also possible that traders may have been worn out from two weeks of selling that saw London spot prices retreat about 8% during the first half of the month. Hedge-fund liquidation and central-bank selling were cited as the reasons for the selloff.

Contracts for December delivery of the yellow metal closed up $9.80 and $592.80 an ounce on the Comex division of the New York Mercantile Exchange, and shares of the bullion exchange-traded funds followed suit, with streetTRACKS Gold Shares (GLD Quote) and iShares Comex Gold Trust(IAU Quote) both lifting more than 1%.

"Be warned that one day does not undo the legacy of the past several sessions," writes metals analyst Jon Nadler in a daily market brief for Montreal bullion dealer Kitco. "Repair work will be intensive and prolonged. Not many want to repeat the lessons learned two Tuesdays ago -- a fake breakout followed by a scary slump."