Comex Gold Soars On Dollar Weakness
Wall Street Journal
Tatyana Shumsky
Gold futures ended the week at all-time highs as the weaker dollar continued to feed gold's historic rally.
Gold for December delivery, the most actively traded contract, settled up $8.20, or 0.6%, at $1,317.80 a troy ounce on the Comex division of the New York Mercantile Exchange. The settlement marked a new all-time high for the most actively traded contract, which also set an all-time intraday high of $1,322.00 per troy ounce in electronic trading overnight.
The nearby gold futures, for October delivery, also ended Friday at an all-time high, settling up $8.30, or 0.6%, at $1,316.10 per troy ounce on the Comex division of the New York Mercantile Exchange.
A weaker dollar helped gold prices maintain their upward trend. Dollar-denominated gold contracts benefit from a weaker dollar as it attracts buying from traders using foreign currencies. Gold is also considered an alternative currency.
The euro catapulted to a six-month high, boosted by upward revisions of the euro zone purchasing managers' indexes. The euro recently traded at $1.3735.
Meanwhile, the dollar declined against a basket of currencies amid increasing market expectation that the Federal Reserve will announce a second Treasury-purchasing program. Such action, while aimed at increasing money supply and boosting economic growth, could further pressure the dollar.
"The dollar has once again taken center stage as far as metal prices go, with gold following the value of the dollar," said Michael Gross, futures analyst with OptionSellers.com.
Gold prices trimmed some of their gains in late-morning trade as positive economic data lowered the likelihood of so-called quantitative easing being imminent.
"We're focused on economic data because it could prompt the Fed into that second round of QE that would potentially pressure the dollar and further support gold prices," said David Meger, director of metals trading at Vision Financial Markets in Chicago.
Gold futures are also garnering support from fund managers, many of whom cashed in their gold positions to lock in third-quarter profits Thursday and are returning to the market Friday.
"Momentum traders are trying to catch up positions they sold earlier for profit-taking at month end and third-quarter end yesterday," George Gero, vice president with RBC Capital Markets Global Futures, said in a note.
As the gold price has risen, miners have increasingly bought back positions they had sold to hedge production, with the aim of having their shares more closely track gold prices. This has also fed the gold price rally. Gold mining companies like Barrick Gold Corp. (ABX), the world's biggest, once represented a large portion of sellers in the gold futures market as they locked in profits on future production.
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