Gold hits 5-week high from early dive triggered by Swiss referendum

Gold prices experienced a dramatic comeback Monday after falling sharply in overnight trading due to Swiss voters unquestionably rejecting a proposal to boost the country’s gold reserves.

The precious metal traded as low as $1,141.70 an ounce overnight, bouncing back to a peak of $1,220 in early afternoon trading.

Spot gold climbed up 2.4% at $1,194.98, while U.S. gold futures for December delivery were up $18.20 at $1,193.70 an ounce.

A combination of factors worked to support gold Monday, including heavy short covering and buy stop orders triggered in the futures, and bargain hunting in the cash market. A weaker dollar and a recovery in oil prices also helped.

Some safe-haven buying also emerged after a downgrade of Japanese debt and weak manufacturing data around the world, market watchers said.

Gold had started the week in a frail note after the “Save our Gold” position was defeated in Switzerland’s referendum Sunday.

Proposed by the right-wing Swiss People's Party out of concern that the Swiss National Bank (SNB) has already sold too much gold, the measure would have compelled the bank to increase its gold reserves to 20% from around 8% it holds at the moment.