By Polya Lesova & Myra P. Saefong, MarketWatch
FRANKFURT (MarketWatch) -- Gold futures surged to nearly $1,067 an ounce on Tuesday, buoyed by news that India's central bank has bought 200 metric tons of the precious metal from the International Monetary Fund.
Gold for December delivery rose $9, or 0.9%, to $1,063 an ounce in electronic trading on Globex.
The contract earlier reached a high of $1,066.90 an ounce, building on an already strong gain of $13.60, or 1.3%, Monday on the New York Mercantile Exchange.
The International Monetary Fund said Monday it sold 200 metric tons of gold to the Reserve Bank of India. That's part of a total of 403.3 metric tons of gold approved for sale in September.
The transaction, which is in the process of being settled, involved daily sales that were phased over a two-week period between Oct. 19 and Oct. 30, with each daily sale conducted at a price set on the basis of market prices prevailing that day, the IMF said. The total sales proceeds are equivalent to $6.7 billion.
This news is "very bullish," wrote analysts at bullion dealers GoldCore in a note to clients.
"The sales occurred over two weeks prior to October 30 when gold was trading between $1,030/oz and $1,070/oz, showing that physical demand for gold is very robust at these levels," they said.
Gold futures gained on Tuesday, even as oil prices fell more than 1% and the U.S. dollar rose against most of its major rivals. Gold prices usually fall when the dollar is stronger.
The dollar index (DXY 76.70, +0.41, +0.54%) , which tracks the performance of the greenback against a basket of other major currencies, rose 0.5% to 76.668.
Gold has also found support due to technical buying and a lack of major negative news, according to Chintan Karnani, analyst at Insignia Consultants in New Delhi.
And gold traders are "position building" ahead of the three major upcoming central bank meetings: the U.S. Federal Reserve, the European Central Bank and the Bank of England, he said, with none of them expected to change their interest-rate outlook until the first quarter of 2010.
"In my view, it will be a very volatile week," said Karnani.
Looking ahead, it's possible that gold prices will test their previous high, analysts at Credit Suisse said in a research note issued Tuesday.
In mid-October, front-month futures climbed above $1,070, the highest nominal level for a front-month contract.
"But further event risks loom over the course of the week, with the [Federal Open Market Committee] meeting taking place on Wednesday," the Credit Suisse analysts said.
The FOMC may alter its statement to a "less dovish tone, which could trigger some profit-taking across the precious metals space," they said.
