US gold futures rebounded 1 percent early on Friday on safe-haven buying and as the Federal Reserve provided liquidity to keep financial markets operating smoothly after Thursday's tumultuous sell-off.
But dealers cautioned that the precious metals market could remain volatile in the near term. "The historical role of gold as a safe haven attracted some reinvestment today. I don't think we're through with all these. I think there will be choppy times ahead," said Paul McLeod, vice president of precious metals of Commerzbank in New York.
At 10:32 am EDT (1432 GMT), most-active gold for December delivery> on the COMEX division of the New York Mercantile Exchange was up $6.40 or 1 percent at $679.20 an ounce, after touching a low of $668.80 which matched the weakest level since July 27. Its high was $680.40.
The US central bank, seeking to calm nervous investors and to head off spreading problems in credit markets, said in a statement on Friday that it was pumping money into the banking system to keep financial markets running normally.
The Fed added $19 billion of temporary reserves to the banking system on Friday. The Fed added a total of $68.5 billion to its reserves this week, compared with a total of $50.25 billion last week. McLeod said that the Fed's move helped settle down the level of concern and calmed the water for the moment.
But he said that bullion investors remained nervous because the underlying problem with the US subprime mortgages still needed to be resolved. "As people are back and forth between the need for liquidity and looking for a safe-haven asset, I think gold has a role to play in both. And in long term we will benefit from the situation," McLeod said.
One COMEX floor trader in New York also said that the extra liquidity provided by the Fed helped gold and silver. "But I don't think it (Friday's gain) is going to hold up," the COMEX trader said. "We are following the S&P tick-to-tick here. I think there are more liquidations to go."
US stocks opened sharply lower for a second straight day, with both the broad-based Standard and Poor's 500 Index and the Dow Jones industrial average down more than 1 percent.
Analysts, however, said that strong physical buying at lower price levels around $660 on a spot basis should offset liquidation pressure. Spot gold was quoted at $668.60/669.20 an ounce, compared with $661.20/662.00 late Thursday. The London morning gold fix was $664.50.
Silver followed gold's bounce. COMEX September silver was up 13.5 cents or 1.1 percent at $12.840 an ounce. It hit a session low of $12.605, a one-month low. Its session high was $12.890.
Spot silver was quoted at $12.79/12.82 an ounce compared with $12.62/12.67 late Thursday. London silver was fixed at $12.690. NYMEX October platinum gained $1.80 to $1,277.10 an ounce. Spot platinum fetched $1,270/1,274 an ounce. September palladium was down $11.95, or 3.3 percent, to $350.25 an ounce. Spot palladium was quoted at $349/352 an ounce.
Comments
Comments are closed.