(Adds analysts' comments, LME copper movements)

 
   By Elisabeth Behrmann 
   Of DOW JONES NEWSWIRES 
 

SYDNEY -(Dow Jones)- Spot gold jumped 1.1% in early Asian trading Monday on the back of fund buying that triggered buy stops, propelling the metal yet higher in a move that weighed on the dollar.

"We closed on the day's high Friday, so that prompted more buying this morning. People are talking about buying gold long-term exposure, as a safe haven," said Anderson Cheung, director of precious metals at Mitsui Bussan in Hong Kong.

Gold hit an all-time high of $1,163.75 troy ounce, up $12.85 and building on an earlier, surprisingly fast move amid thin volume.

Bullion's rise and a weaker dollar also helped other commodities, with London Metal Exchange copper rising to $6,960 a metric ton, up $115, or 1.7%, on the Friday afternoon kerb.

Also in focus is the Comex options expiry later Monday, where market participants, mostly funds, have accumulated an unusually large options exposure of about 3 million ounces at a strike price of $1,200/oz.

"There's much talk around the options expiry, but that's mostly talking. It is prompting some nervous short covering, but little fresh buying," said Cheung, who tipped heavy volatility in the remaining hours before expiry--and after.

"The question is also--should gold go to $1,200/oz--who'd go long there?" he said. "Right now it's dangerous to add more longs."

Funds that took advantage of thin liquidity in early Asian trading to move gold were likely behind the initial rally, prompting momentum funds to react. A holiday in Japan Monday is further reducing liquidity, making it easier to move the gold price up before the London opening.

"Gold printing a record high so early today gets the black box momentum funds going," said a Sydney-based trader.

Sue Trinh, FX strategist at RBC Capital Markets in Sydney, said the higher gold price in early Asian trading was the main driver of the forex market.

"With gold up, the U.S. dollar is getting smoked against everything," said Trinh, with the euro at $1.4900, up from $1.4848.

Copper appears galvanized against bearish developments, with the market shrugging off news of workers at BHP Billiton Ltd.'s (BHP.AU) Spence mine in Chile reaching a wage deal after going on strike Oct. 13.

In addition, China's October copper imports fell 40% on month to 169,374 tons. ANZ senior commodity strategist Mark Pervan said LME copper stocks were rising, but are still at only about seven days of consumption, historically a very low ratio.

And aside from Spence, a number of mines in South America are still to forge new labor contracts until the end of the year, leaving copper with a supply disruption premium, said Pervan. Copper's "supply balance is still tight" despite a slow demand recovery, he added.

-By Elisabeth Behrmann, Dow Jones Newswires; 61-2-8272-4689 elisabeth.behrmann@dowjones.com

(END) Dow Jones Newswires

November 22, 2009 22:44 ET (03:44 GMT)

Copyright (c) 2009 Dow Jones & Company, Inc.