Gold Price Rebounds

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"This market has the potential to finally put on a sustainable rally."

The dollar rose as did gold. Gold rose in Europe on Thursday as the world's largest gold-backed exchange-traded fund's holdings set a record and Wednesday's equity rally fizzled out, boosting the appeal of gold as a safe investment. Spot gold rose to $913.15/$914.15 an ounce from $906.65 late in New York on Wednesday.

Canadian stocks gained too, building on their biggest rally since November, as mining companies rose with gold prices and financial stocks rallied for a second day on speculation that the worst of the banking crisis may be over.

"This market has the potential to finally put on a sustainable rally," said Gerry Brockelsby, founding partner of Marquest Investment Counsel in Toronto, which managed about $286 million as of September. To add to the melee, the world's largest gold-backed ETF, the SPDR Gold Trust, said its holdings hit a record on Wednesday, fuelling expectations investor demand will remain strong. They rose 9.18 tonnes or nearly 0.9% to 1,038.17 tonnes.

"Investor demand for gold is there until we see a sustained rally in equities," said VTB Capital analyst Andrey Kryuchenkov. The U.S. dollar was mostly higher against other major currencies. The dollar strengthened 0.5% against the Euro as a recent run of risk appetite ran out of steam, boosting interest in the currency as a haven. While a stronger dollar usually pressures gold, which is typically bought as an alternative to the currency, both assets are moving in the same direction at present, as they take their cues from risk aversion.

Gold traded slightly higher in Asia too. It soared higher in the last three and a half hours of trade and the yellow metal ended near its high of $913.15 with a gain of 1.55%. Silver also surged back higher in late New York trade and it ended near its high of $12.885 with a gain of 2.4%.

Among other metals for immediate delivery, platinum climbed $10.50, or 1%, $1,052 an ounce and palladium rose 75 cents to $198.75 an ounce.

Investors are buying into gold as a safe store of value amid volatility in other asset classes. As gold ETFs are backed by physical stocks of a precious metal, they are marketed as lower in counterparty risk than other investments.

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