Gold Hits 1-Month High, Breaks Ranks with Euro
Reuters
Gold rose to a one-month high on Wednesday, breaking ranks with the euro and equities, as evidence of strong physical demand from China fueled fund buying after bullion's recent sell-off.
The metal rose for a second day as the single currency hit a 16-month low against the dollar after ratings agency Fitch warned of dire consequences if the European Central Bank refrains from taking more action on Europe's debt crisis.
Bullion has gained around 5 percent in 2012, appearing to halt a strong, positive link with riskier assets. In the previous two months, gold had tended to fall when the dollar strengthened, trading in virtual lockstep with the euro.
However, some analysts said gold's gains could be short-lived because the metal has failed to garner safe-haven buying even as markets fretted over the viability of the euro.
"The strength of the dollar has not been friendly to commodities markets in the past couple of years. As long as the dollar is in an uptrend, I wouldn't be too positive on gold at this point," said Mark Arbeter, chief technical strategist at S&P Capital IQ.
Spot gold was up 0.3 percent at $1,637.51 an ounce by 2:36 p.m. EST (1936 GMT). U.S. February gold futures settled up $8.10 at $1,639.60 an ounce, with volume in line with its 30-day average.
Gold's gain brought prices above their 200-day moving average around $1,635 an ounce. The metal had held the 200 DMA for around three years until late December.
The metal drew support from macro hedge fund buying, said James Steel, chief commodities analyst at HSBC.
Gold's rally to a one-month high of $1,646.90 on Wednesday has given investors more confidence to buy the metal, especially in light of improved demand in India given the rupee's rise against the dollar, and a sharp increase in Chinese imports.
Data showing record gold imports to China late last year has reassured investors that physical offtake is underpinning the market. China, the number-two buyer of the metal, is preparing for the Lunar New Year this month, a key gold-buying period.
FLURRY OF TRADE
The volume of gold futures traded has risen as the metal rallied, suggesting an improved outlook for bullion, analysts said.
According to data from CME Group, which offers the benchmark gold futures contract, volume on Tuesday reached its highest in a month.
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Gold Hits 1-Month Highs as Safe-Haven Bid Returns
Reuters
Gold rose 1.5 percent to one-month highs on Wednesday, notching its longest stretch of gains in over two months, as investors once again sought the safety of bullion in the face of a euro drop and uncertainty over the outcome to a key EU summit.
Bullion has gained nearly 7 percent during its four-day winning streak, and it appeared to reprise its traditional safe-haven role after having moved in sync with riskier assets over the last five weeks and having tracked equities and copper more closely than at any time in the last five months.
Bullion rose as expectations of a comprehensive solution emerging from a second European Union summit have diminished for now. However, investor anticipation that EU will eventually use massive market stimulus to rejuvenate the 17-nation economic zone gave gold a huge boost.
"Investors have been looking for safety with the euro currency selling off. Also weakness in the U.S. equities dragged by disappointing earnings also helped gold," said Phillip Streible, senior market strategist at futures broker MF Global.
"If gold can close higher today, I think it can test resistance at 50-day moving average of $1,740 an ounce," he said.
Spot gold was up by 1.2 percent at $1,721.24 an ounce by 1:47 p.m. EDT, having risen earlier to a one-month high of $1,726.50.
Gold rose above $1,700 an ounce for the first time in a month on Tuesday, notching one of its biggest rallies since 2008, fueled by the gloomiest U.S. consumer sentiment data in 2-1/2 years.
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Gold Rises to One-Month Highs on Weak U.S. Outlook
Reuters
Gold rose to its highest price level in more than a month on Monday, as fears about a slowing economy and expectations of easy U.S. money policies prompted safe-haven demand.
Bullion prices have gained nearly 6 percent in the past three weeks, boosted by a string of disappointing U.S. economic indicators including Friday's weak job data.
"A lot of people are taking their risk off by getting out of the S&P 500 and other riskier assets. There is too much uncertainty with the U.S. currency and the euro. So, people think the safest place is the gold market at the moment," said Phillip Streible, senior market strategist with Lind Waldock, a unit of futures broker MF Global.
Spot gold was up 0.7 percent at $1,553.50 an ounce by 12:22 p.m. EDT, building on three consecutive weeks of gains and rising to its highest level since early May. Bullion hit a record $1,575.79 an ounce on May 2.
U.S. August gold futures gained $10.40 to $1,552.20.
Spot silver rose 2.4 percent to $37.055, rebounding from near two-week lows in the previous session, bringing the gold/silver ratio to 42.1, its lowest since Thursday, denoting its outperformance over gold in the last few trading days.
Silver prices have fallen by more than a quarter since hitting a record $49.51 on April 28 but are still up 19 percent on the year, compared with gold's 9 percent rise.
Friday's surprisingly weak U.S. employment data kept the dollar near one-month lows and suppressed investor risk appetite.
"Weak U.S. economic data last week are strengthening expectations that the Federal Reserve will maintain key interest rates at the current very low level for even longer, which will keep the opportunity costs for precious metals low," Commerzbank said in a note.
The S&P 500 index hit a more than two-month low as U.S. stocks extended a five-week decline on weak performance by the bank and financial sector. .N
The biggest risks to a rally in the U.S. stock market is that economic growth could be slower and energy and other raw material prices could rise, Goldman Sachs' chief U.S. equity strategist said.
YEMEN, EURO DEBT IN FOCUS
Uncertainty over the future of Yemen while President Ali Abdullah Saleh was recovering from injuries sustained in an attack on his palace on Friday also unnerved markets.
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Gold Touches 1-Month High as 2011 Gets Underway
Gold was little changed on Monday after rising to within $10 of its record high, and silver and palladium hit multi-year peaks, driven by pent-up demand on the first trading day of 2011.
Bullion's safe-haven demand was weakened after U.S. data showed manufacturing grew for a 17th straight month in December, extending a recent run of encouraging economic data and suggesting U.S. growth could accelerate further in 2011.
"The stock market is doing very well, and with the dollar still relatively weak, investors tried to run the gold but they just failed," said Bruce Dunn, vice president of trading at bullion dealer Auramet.
U.S. stocks rose, lifting the Nasdaq 100 to a 10-year high, as investors bet a 2010 rally would continue in the new year and factory and housing data pointed to a strengthening recovery.
The dollar was also flat against a basket of currencies, after it trimmed gains against the euro after the strong U.S. data.
Spot gold inched down less than 0.1 percent to $1,419.90 an ounce at 12:14 p.m. EST.
U.S. gold futures for February delivery fell $1.90 an ounce to $1,419.50. Volume was lower than usual with the London market still on holiday.
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