Gold futures rally 2% as Syria tension attracts safe-haven bids

Investing.com - Gold futures rallied to a 12-week high on Tuesday, trading firmly above the key USD1,400-level as safe-haven buying picked up amid growing speculation the U.S. was moving closer to taking military action against Syria’s government.

Investors often buy gold as a refuge against political uncertainty.

On the Comex division of the New York Mercantile Exchange, gold futures for December delivery traded at USD1,420.00 a troy ounce during U.S. morning hours, up 1.9%. The December contract settled down 0.2% at USD1,393.10 a troy ounce on Monday.

Futures rose by as much as 2% earlier in the day to hit a session high of USD1,422.00 a troy ounce, the strongest level since June 6.

Gold futures were likely to find support at USD1,351.90 a troy ounce, the low from August 20 and near-term resistance at USD1,428.55, the high from May 15.

U.S. Defense Secretary Hagel said earlier that the U.S. military was ready to act immediately should President Barack Obama order action against Syria in wake of allegations Bashar al-Assad’s government forces used chemical weaponry against civilians.

Hagel’s comments came one day after U.S. Secretary of State John Kerry said that President Obama would hold Syria’s government accountable for using chemical weapons.

Also Monday, U.K. Foreign Secretary William Hague said the U.K. is convinced Assad was behind the chemical weapons attack and that there was agreement with the U.S. and France on the need to respond.

Meanwhile, uncertainty over how soon the Federal Reserve will start to unwind stimulus measures continued after data on Monday showed that U.S. durable goods orders fell in July.

The Commerce Department said U.S. durable goods orders dropped 7.3% in July, worse than expectations for a 4% decline. It was the largest decline since August 2012.

The data came after a report on Friday showed that U.S. new home sales fell by a larger-than-forecast 13.4% in July, the largest decline in more than three years.

Gold traders have closely been looking out for U.S. data reports recently to gauge if they will strengthen or weaken the case for the Fed to reduce its bond purchases.

The central bank is scheduled to meet September 17-18 to review the economy and assess policy.

The precious metal has rebounded 17% since hitting a 34-month low of USD1,180.15 a troy ounce on June 28.

Despite recent gains, the precious metal is still on track to post a loss of approximately 16% on the year amid concerns the Fed will start to unwind its stimulus program by the year's end.

An exit from the stimulus would deal a heavy blow to gold, which has thrived on demand from investors who buy gold to hedge against the inflationary risks of loose monetary policies.

Elsewhere on the Comex, silver for December delivery surged 2.45% to trade at USD24.64 a troy ounce, the strongest level since April 26.

Silver prices are up 26% since hitting a three-year low of USD18.19 on June 28, placing it firmly in bull-market territory.

Meanwhile, copper for December delivery added 1.1% to trade at USD3.364 a pound.