Buying by funds and a weaker dollar drove US gold futures higher on Thursday, but traders said the precious metal must break above a key resistance level before rising further. Volatility in gold futures options also dropped drastically as global financial markets have steadied in the past several days, a floor trader said.
"The funds are buying here on the floor," said Jonathan Jossen, an independent trader in New York. At 10:35 am EDT (1435 GMT), most-active gold for December delivery on the COMEX division of the New York Mercantile Exchange was up 30 cents at $669 an ounce, trading between $667.50 and $674.50.
Jossen said early trading volume was decent, and a rally in silver futures, rising crude oil prices and a weaker dollar helped gold. Jossen said gold futures option volatility had fallen sharply from earlier this week, when investors were in a panic and high volume of option buying was seen.
"Option volatility has come crashing in. If you long it, it's bad; if you short it, it's good," he said. "The question is 'Can we get through $675?' That's the big one," Jossen said. December futures came off their early session high of $674.50 after they failed to breach above the $675 level.
This week, investor sentiment has improved with a growing sense of calm and confidence returning to global financial markets. The global credit squeeze also showed signs of improvement. On Wednesday, Countrywide Financial Corp received a $2 billion injection from Bank of America Corp, helping the largest US mortgage lender shore up its finances as it struggles with a liquidity crunch.
James Moore, analyst at TheBullionDesk.com in London, said in a research note that key resistance levels for spot gold were around its 100-day moving average of $666.55 and $674, while he expected scaled-down buying toward $650. "Gold ... should continue to benefit from further investment demand through exchange-traded fund products as investors add safe-haven protection to their portfolios," Moore said.
Spot gold was quoted at $660.25/660.75 an ounce, compared with $659.40/660.20 late Wednesday. The London morning gold fix was $662.25. On the labour-action front, South African mining union Solidarity said on Wednesday it would recommend a new wage deal to its members to avoid a strike in the massive gold sector, while the country's largest union said it would put the offer to a vote. South Africa is the world's top gold producer and accounts for around 12 percent of world output.
COMEX September silver was up 14 cents, or 1.2 percent, at $11.705 an ounce, dealing between $11.645 and $11.895. Spot silver was quoted at $11.66/11.71 an ounce, compared with $11.58/11.61 late Wednesday. London silver was fixed at $11.88. NYMEX October platinum dropped $6.50 to $1,242.10 an ounce. Spot platinum fetched $1,237.10/1,244.10. September palladium rose $1.25 to $324.25 an ounce. Spot palladium was quoted at $323/327.