Gold extends gains in volatile trade

The precious metal built on the previous session's record run as investors sought the safety of commodities in the midst of Wall Street's meltdown.

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By Ryan Derousseau, contributing writer

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NEW YORK ( -- Gold prices jumped Thursday, a day after the precious metal rallied to its biggest one-day gain ever, as investors sought safety from the financial crisis.

Gold for December delivery rose $46.50 to settle at $897 an ounce. Gold had jumped as high as $926. The gains follow a record one-day rise of $70 seen Wednesday bringing the two-day total to $116.50.

While the rally was a bit more muted Thursday, one analyst noted that increasing volatility may lead to some wild swings.

"We had $30 gains, and lows as low as $851," said Jon Nadler, senior analyst with "Volatility is on the rise here. I wouldn't exclude $50 moves in either direction."

The volatility is partly a result of this week's massive sell-offs on Wall Street. Monday and Wednesday recorded the two worst trading days for the Dow industrials this year. Throw in Lehman Brothers' (LEH, Fortune 500) bankruptcy, the government's $85 billion bailout of American International Group (AIG, Fortune 500) and fears over which firm is next, you have investors on edge to say the least.

And gold, along with other physical commodities, is often seen as a hedge against inflation and a safer bet in the wake of the financial crisis roiling Wall Street.

However, the funds pouring money into gold as a way to hedge against the financial meltdown could just as easily pull that money out, and "it makes for volatility for the individual investor," said Nadler. "Most small retail buyers are long-term accumulators. They don't appreciate it."

Analysts expect this volatility to stay, for the time being. The $900 point is an important mark for traders. Carlos Sanchez, a precious metals analyst at CPM Group, said as gold hits $900 he would expect it to drop slightly as people cash out with a cool gain on their investment.

Still Sanchez believes gold will remain volatile, and it price rise should continue. "With everything going on it's creating an atmosphere that you need to store your wealth and keep it from declining," he said.

"Expect gold to be volatile, perhaps over the next several weeks. I still see it to increase and brake the record high set earlier this year." The record for gold is $1033.90 set on March 17.

Crude flirts with $100: Oil has also benefited from the 'safe-haven' syndrome, with prices briefly jumping above the benchmark $100-a-barrel level.

Crude futures for October delivery dropped 51 cents to $96.65 a barrel midday.

Part of the pullback stems from a global central bank deal to pump $180 billion into troubled markets. Oil was also pressured by ongoing worries about a slowdown in demand.

Stocks churn: Wall Street initially rallied following the announcement by the Federal Reserve and five other central banks, committing to infuse the troubled markets with $180 billion.

Investors continued to bail out of select financial stocks, tempering earlier gains.

Dollar mixed: The euro rose slightly against the dollar to $1.4428 from $1.4329 late Wednesday. The British pound bought $1.8228, up from $1.8175. Meanwhile, against the Japanese yen, the dollar fell to ¥104.414 from ¥104.786.  To top of page

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