Metals rise on European bailout fund news

Precious metal prices are rising on expectations that European finance ministers could implement a bailout package worth more than US$1 trillion.

Gold for December delivery rose US$16.20, or one per cent, to settle at US$1,652.30 an ounce. December silver was up 45.1 cents, or 1.45 per cent, to close at US$31.644.

Precious metal prices have been affected by headlines out of Europe about talks to resolve the region's debt crisis.

Gold and silver have risen when a sweeping European bailout plan for heavily indebted countries like Greece and the region's banks seems closer.

Investors fear that a big bailout programme could lead to inflation, which would increase the appeal of hard assets like precious metals. Traders often buy those metals when they are worried about inflation.

On Monday, German officials said a European bailout fund might have its lending capacity increased to more than US$1.39 trillion. The European Financial Stability Fund (EFSF) can currently lend about US$600 billion.

German parliamentary leaders said Chancellor Angela Merkel informed them that the EFSF's lending powers will be boosted significantly.

Industrial metals and oil prices also rose. Those metals are up because traders think demand could increase for raw materials like copper and platinum of the European financial crisis is contained.

The price of copper for December delivery surged 22.6 cents, or seven per cent, to settle at US$3.449 a pound. December palladium rose US$20.25, or nearly 3.3 per cent, to US$638.50 an ounce. And January platinum gained US$32.80 to finish at US$1,542 an ounce.

Oil prices rose on optimism that economic growth will gain strength in the United States and Asia. As those economies grow, energy demand will increase. Benchmark oil rose US$3.87 to US$91.27 per barrel on the New York Mercantile Exchange.