Gold Up on Safe-Haven Buying, Dollar Weakness
MarketWatch
Gold futures inched higher Friday, leaving behind early-session losses as a lower dollar and safe-haven buying ahead of the weekend supported prices.
The early price weakness was met with buying interest that quickly pushed prices higher, a good sign for gold’s short-term gain prospects, analysts said.
Gold for February delivery rose $6, or 0.4%, to $1,732.70 an ounce on the Comex division of the New York Mercantile Exchange after tapping a low of $1,714.20 earlier.
A close in the black would be gold’s third straight session of gains.
Gold surged more than 3.6% in the past two days, and on Thursday settled at its highest in seven weeks.
The metal has enjoyed strong recent gains spurred by the Federal Reserve’s projection of ultra-low interest rates through 2014.
Gold prices have risen nearly 10% so far this month.
“Gold looks great in the charts and a lot of people are taking it as a sign to buy gold,” said Adam Klopfenstein, a market strategist with Archer Financial Services in Chicago.
Ahead of the weekend and potential for headlines out of Greece and the euro zone, some are also adding gold to their portfolio as a safe haven, he added. A lower dollar also helped push prices higher, Klopfenstein said.
The Wednesday Fed decision “awakened the positive gold sentiment” that had been underneath the surface but cloaked in caution after the selloff in fourth quarter, said Jeffrey Wright, a senior research analyst with Global Hunter Securities.
“Inflation is in the market; (it is ) just being under-reported in my opinion,” he said. In addition, the “miss” on fourth-quarter gross domestic product will give the Fed an “additional cover” to continue its “easing” stance and will also contribute to gold going higher, he added in emailed comments.
Earlier Friday, investors parsed out news U.S. GDP expanded 2.8% in the fourth quarter, compared to expectations of a rise around 3%.
Other metals more linked to industrial uses, and therefore more sensitive to the GDP news, felt the pressure on Friday, but silver turned higher.
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Gold Still Set for Big Week Despite Early Weakness
Mineweb
Gold eased on Friday but was still on course for its biggest weekly rise in two months after the euro zone's last-minute deal on containing debt crisis buoyed commodities and equities in the previous session.
Spot gold retreated from a one-month high of $1,751.99 to $1,736.69 an ounce by 0917 GMT, down 0.4 percent from the previous close, but still on course for a gain of around 6 percent from a week earlier, the biggest one-week rise in two months, according to Reuters graphics.
"It's underperforming ... right now, which is not surprising us at all ... although we wouldn't rule out further consolidation at the current level, we still firmly believe that the risks in the system longer term justify even higher prices," Commerzbank analyst Eugen Weinberg said.
The precious metals rose on Thursday, boosted by gains in equities and commodities as the dollar dropped after a euro zone agreement to boost the region's bailout fund and slash Greece's debt.
Even as many investors returned to riskier assets, gold also benefited from some safe-haven flows by investors who remained wary about the euro zone agreement until more details emerge.
On Friday, the head of Europe's bailout fund said he does not expect to reach a conclusive deal with Chinese leaders during a visit to Beijing but expects the surplus-rich country to continue buying bonds issued by the fund.
U.S. gold GCcv1 lost around 0.4 percent to $1,739.70, also headed for its sharpest one-week gain in two months with a 6.3 percent rise.
The dollar index edged up after suffering its biggest one-day loss in more than two years, as the euro rally paused. A stronger dollar makes commodities priced in the greenback more expensive for holders of other currencies.
European shares extended the previous session's rally.
ECONOMIC FUNDAMENTALS
The relief on Europe's problems, however temporary, will allow investors to shift their attention to other pressing concerns.
Many market watchers expect China's central bank to begin to loosen up its tight liquidity policy by the end of the year, as China's economic growth slows and hopes run high that inflation has peaked.
Holdings of the largest gold-backed exchange-traded-fund (ETF), New York's SPDR Gold Trust fell 0.05 percent from Wednesday to Thursday, while that of the largest silver-backed ETF, New York's iShares Silver Trust SLV, remained unchanged for the same period.
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10 Forecasts for 2011 – Gold, Dollar, Stocks, Politics
The Market Oracle
Jason_Hamlin
My first prediction is that my forecasting abilities will worsen each year, as today’s markets are driven less by fundamentals and increasingly more by the whims of elite bureaucrats deciding how many Trillions of taxpayer dollars to toss to their bankster friends. I’m not sure if we’ve ever had truly free markets, but I am certain it is not the case in modern-day America. But, let’s give it a go anyway…
#1 Gold will climb to a minimum of $1,800 and silver to $45. Mining stocks will perform much better than in 2010 and return to offering leverage of at least 2X the advance in the underlying metal. Juniors will continue outperforming the major producers by a wide margin. Corrections will become less severe both in magnitude and duration due the winding down of the manipulation scheme by JPMorgan, HSBC and other banks. The potential for CFTC position limits and sudden willingness of long-term investors to stare down the shorts and clench their gold all the tighter during sudden take downs will also help to moderate declines.
#2 The dollar index will enjoy some strong rallies throughout the year on Euro weakness, but will end the year down 10% or more against the stronger currencies. It might not be the year the dollar dies quite yet, but the weakness in the Federal Reserve’s fiat currency will become more and more evident around the globe.
#3 The FED will be forced to step up its stimulus in order the keep the economy afloat. Look for QE 3 during 2011. Similarly, Bernanke will increase the monetization of U.S. debt in order to keep rates low and fund growing government deficits. U.S. citizens will become increasingly aware of the FED with growing negative sentiment thanks to Congressman Ron Paul’s new position as head of the Fed Oversight Panel.
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Gold Soars as ECB Policymakers Warn about Currency War. USD Resumes Weakness
International Business Times
Expectations of Fed's QE continued to dominate movements of asset prices. While it's almost certain that the Fed will announce new easing measures at the upcoming FOMC meeting, the size and the timing have spurred rigorous debates in recent days. The dollar resumed weakness yesterday as the New York Fed surveyed bond dealers' expectations of asset purchases over the next 6 months. Losses were pared later in the day but mixed economic data failed to depict a clearer outlook for Fed's move. Commodities rebounded as USD fell. The front-month contract for WTI crude oil climbed higher and settled at 82.18, up +0.29% while gold rose strongly to a 3-day high before closing at 1342.5, up +1.50%.
BOJ's decision to bring forward the next meeting to November 4-5 signaled that the Fed will very likely to announce QE2 next week. While the dollar had rebounded amid worries that the program may be smaller than previously expected, renewed selling pressure was seen after a Fed's survey. The New York Fed asked bond dealers about their expectations for the initial size of any new program of debt purchases and the time over which it would be completed. It also asked companies how often they anticipate the Fed will re-evaluate the program, and to estimate its ultimate size. Questions such as estimated changes in nominal and Treasury yields 'if the purchases were announced and completed over a 6-month period', with amounts ranging from zero, 250B, 500B and 1 trillion induced speculations that the Fed's measures may be aggressive.
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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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Gold Settles Near $1,309 as US Dollar Weakens
CNBC
Gold settled mostly flat Thursday, as the dollar weakened and the Federal Reserve stood ready to pump more cash into the U.S. economy to stave off double-dip recession.
Having hit its 11th record high in 13 trading sessions, gold was on course for a 5 percent gain for the month and the likelihood the Federal Reserve will pump more cash into the financial system to support the economy lifted silver as well.
Spot gold reached a record high of $1,315.80 an ounce and was last bid around $1,308, against $1,308.80 late on Wednesday.
U.S. gold futures for December delivery settled down $0.70 to end at $1,309.60.
Two measures of U.S. regional business activity beat expectations and a drop in weekly jobless claims supported the view that economic activity picked up in the third quarter, which boosted the dollar against a basket of major currencies and in turn weighed on gold.
However, this was unlikely to change the view that the world's largest economy is flagging, which bolstered gold's safe-haven status.
"In the United States, you've got a gradual grind on the economic side, so low GDP growth, the Fed likely to keep rolling over its balance sheet for a while and not increasing interest rates," said Bank of America-Merrill Lynch analyst Michael Widmer.
"In that environment, you have a lot of uncertainty and people are looking to increase their gold holdings."
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