Gold futures rose above $625 an ounce for the first time in two months on Thursday as investors and speculators competed to buy, spurred on by the break of certain chart levels and a soft dollar. Upward momentum gathered in other precious metals, with platinum soaring 5.7 percent in catch-up technical buying.
Gold futures are up almost $52 since starting to rally on October 24 from $576 an ounce, catalysed by a break above the downward sloping trundling from the 26-year highs in May. "Everybody is turning bullish after that," a bullion trader said.
"It's Technicals and good investment money coming into this market." December gold at the Comex division of the New York Mercantile Exchange rose $8.50 to settle at $627.80 an ounce. It opened slightly lower, pausing from Wednesday's rally, then, from a low of $616.50, reached $628.30 in open outcry trade, the highest price since September 8.
"We had a lot of fund buying coming. They all jump in as a herd," said a desk broker. "I can't help but think dealers might see that as an opportunity to sell it." Estimated Comex volume on Wednesday was 49,000 contracts, while options turnover was 26,000. Turnover in the Chicago Board of Trade's electronically traded 100-oz gold contract was 49,865 contracts as of 2:21 pm EDT (1921 GMT) (http://www.cbot.com/cbot/pub/page/0,3181,297,00.html).
The dollar was a tad lower at $1.2782/85 against the euro and 117.08/12 yen, lubricating the buying as foreign currency-based investors got a mark-down on the gold price. Pressure on the dollar was reinforced on Thursday when news that September factory orders rose 2.1 percent, less than the 4.0 percent rise expected, dovetailed with a report that business productivity growth stalled in the third quarter.
But the influence of the dollar was secondary to the technical buying. "I don't think it's hurting, but I don't think it's the reason why we started," the bullion trader said. Gold built enough upward momentum this week to break its correlation with Nymex crude oil, which fell another 83 cents on doubts that Opec can deliver on a planned production cut.
Some of the investor money leaving the energy market has been directed to gold. Gold's acceleration higher this week also came as the Dow Jones industrial stock average pulled back from last week's record high.
"I think there may be a little bit of asset reallocation going on," said Bill O'Neill, of commodity consultants LOGIC Advisors. "Some of these equity longs are seeing the stock market a little long in the tooth for now and doing a little bit of switching over."
But gold equities have kept rallying. The XAU Index of gold and silver mining companies at the Philadelphia Stock Exchange was up half a percent on Thursday afternoon. Spot gold bullion closed New York at $623.90/4.90, up from $618.30/9.30 on Wednesday. Bullion dealers fixed London's afternoon spot reference price at $620.75 an ounce. December silver went up 17.5 cents to $12.65 an ounce, trading from $12.385 to $12.67, the contract's highest since September 8.
Spot silver rose to $12.53/60 from $12.45/52. The fix was at $12.41. Nymex January platinum soared $63.50 to $1,164.20 per ounce. Spot platinum closed priced at $1,155/1,161. "We got through some technical levels and that started setting off the black boxes," said a dealer at precious metals refining company, referring to the computer trading systems used by some commodity funds. December palladium went $2.65 higher to $326.75 an ounce. Spot palladium fetched $321/326 an ounce.
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