Gold Prices Rally in a Move to Safety

Gold prices rallied as safe-haven buying amid broader global market worries sent the metal briefly past $800 an ounce.

The move higher gained support from participants buying back positions to cover "short" bets that prices would fall. Traders and investors also added fresh long positions that anticipate further price increases in the wake of Thursday's expiration of December gold options.

Support after option expiration "left shorts scrambling to cover, adding to a jump in investment demand," said George Gero, vice president with RBC Capital Markets Global Futures.

The price of the thinly traded nearby November gold contract rose $43.10, or more than 5.8%, to settle at $791.70 an ounce on the Comex division of the New York Mercantile Exchange.

The price of the most-active December contract also rose $43.10, settling at $791.80 an ounce. In pit-trading hours, the contract hit as high as $801.90, then moved as high as $802.80 in afterhours electronic trading.

Although the safe-haven buying picked up from the muted levels of late, the rally may prove fragile as there is the potential for profit-taking going into the Thanksgiving holiday.

Prices may "crumble" next week if some measure of calm returns to financial markets, said Sterling Smith, vice president with FuturesOne.

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"My gut feeling is it's probably going to fade," said Michael Gross, broker and futures analyst with OptionSellers.com.

Much of Friday's rally in gold came as participants fled to the metal amid "wider financial infrastructure concerns," Mr. Smith said.

Gold benefited as participants looked for a store of value while they fear a "general economic meltdown" and worry about Citigroup Inc., said Zachary Oxman, senior trader with Wisdom Financial. "I think people are looking for a place to hoard money," Mr. Oxman said.

Executives at Citigroup, faced with a plunging stock price, began weighing the possibility of auctioning off pieces of the financial giant.

Gold also gained momentum when rising prices triggered preplaced buy orders.

An options contract conveys the right -- while futures contracts are obligations -- to buy or sell a commodity or equity at a certain price in the future.

In other commodity markets:

COTTON: Prices rose 4.7%, as the aggressive selling that plagued the market earlier in the week dissipated. Cotton also rose on news that most of the deliveries made against the December contract on the first day of the delivery cycle were accepted by an end-user, a bullish sign. The price of the December contract rose 1.35 cents to settle at 40.99 cents a pound