U.S. gold ends higher on weak dollar, fund buying

Posted by Webmaster | World Gold News | Thursday 28 May 2009 8:25 pm

NEW YORK, May 28 (Reuters) - U.S. gold futures ended higher on Thursday, supported by a combination of a weakened dollar, inflation concerns and simmering geopolitical tensions.

 * August GCQ9 settled up $8 at $963.20 an ounce at on the
COMEX division of the New York Mercantile Exchange.
 * Ranged from $945.80 to $966.70.
 * Gold supported as the dollar fell against the euro as
better-than-expected U.S. durable goods orders and weekly
jobless claims boosted risk appetite - forex traders. [USD/]
 * Inflation concerns also stirred buying into the yellow
metal after U.S. crude futures rose above $64 per barrel as
OPEC kept its output unchanged. [O/R]
 * Fund buying came in after futures climbed above $955 an
ounce, and a rally in euros and technical buying also supported
gold - George Gero, vice president of RBC Capital Markets
Global Futures.
 * Gold continued to look expensive relative to agricultural
commodities, and a high bullish consensus figure was worrisome
to gold bulls - Dennis Gartman, independent director and the
author of the daily "Gartman Letter."
 * Contract rollover to August futures continued at a good
pace ahead of first notice day of June contracts on Friday -
traders.
 * Heightened military alert for the Korean peninsula by the
United States and South Korea over a nuclear test by the North
boosted the safe-haven appeal in gold. [ID:nSEO333114]
 * COMEX gold market open interest up 1,341 lots at 398,306
lots as of May 27, indicating investment buying by funds and
institutions.
 * COMEX estimated final volume at 175,904 lots.
 * Gold/oil ratio at 14.81, lower than the 15.02 of the
previous session.
 * Spot gold <XAU=> traded at $960.80 an ounce at 3:04 p.m.
EDT (1904 GMT), up 1.3 percent from its late Wednesday quote in
New York.
 * London gold fix <XAUFIX=> $957.75 an ounce.
 SILVER
 * Silver futures, which are less liquid than gold, rose to
a nine-month high above $15 an ounce, driven by strong
investment buying - traders.
 * July SIN9 finished up 29.50 cents, or 2 percent, at
$15.160 an ounce.
 * Ranged from $14.650 to $15.275, which marked the highest
price since Aug. 14.
 * Support from COMEX December call options activity and a
technical breakout cited for silver's rally - Gero.
 * COMEX estimated final volume at 23,312 lots.
 * Spot silver <XAG=> was at $15.15 an ounce, up 2.9 percent
from its previous finish.
 * London silver fix <XAGFIX=> at $14.88 an ounce.
 PLATINUM
 * NYMEX July platinum PLN9 ended up $8.70 at $1,149.80 an
ounce as the market focused on the latest development in the
U.S. auto industry, which accounted for 60 percent of total
platinum demand as catalytic converters.
 * The news of General Motors Corp (GM.N) making an improved
equity exchange offer to bondholders took a toll on sentiment
in the platinum group metals market. [ID:nN28324145]
 * Spot platinum <XPT=> at $1,141.00 an ounce, up 0.8
percent from its late Wednesday quote.
 PALLADIUM
 * September palladium PAU9 closed up $5.90, or 2.6
percent, at $233.50 an ounce, on pent-up buying after recent
weakness.

Will Gold Pass $1,000 An Ounce Next Week?

Posted by Webmaster | World Gold News | Monday 25 May 2009 6:51 pm

With gold closing at $957 and silver $14.70 an ounce last week there was cause for celebration among precious metal investors.

Traders are pointing to overbought signals and cautioning that the market could pull back. But a peak price on Friday of $961 left gold just a tantalizing $39 below the $1,000 barrier.

Market gurus like Jim Sinclair have noted that these round numbers are always a big issue in markets, and he says gold will make it past and stay past $1,000 on its third attempt – that is where we sit today.

Chart views

Besides a glance at the gold chart indicates that the precious metal is not so much getting ahead of itself – that would come at $1,200-1,300 an ounce- it is merely back on trend in this bull market.

So much for the technicals, the fundamentals could scarcely be better. The fear of inflation and dollar devaluation is driving this rise in price, and the sudden slump in the value of the US dollar last week is the immediate cause of this price spike.

With the upcoming and seemingly unavoidable bankruptcy of General Motors on the horizon next week or the following week markets are likely to weaken. Equities are due to correct from their stunning bear market rally. That might or might not rally the dollar – depending on its steepness.

But last week we saw equities falling and the US dollar and bonds. The only show in town was precious metals. Could this be a new pattern?

Gold traders are looking back to past performance and the usual soft summer patch for prices. But we have been through a global financial crisis, which is still ongoing, since last summer and this pattern may have changed as a consequence.

There is certainly a good argument for selling equities – because the recovery is a long way off and mainly a fiction of lurid imaginations – and also avoiding US treasuries – because of the risk of devaluation.

Safe haven

Gold and perhaps even more silver offer protection against these factors, and as investors around the world cotton on to what is happening the tight supply in both these markets promises a price explosion to the upside.

Under Elliott Wave theory the price of gold could rise quickly to $2,500 an ounce with silver surging past $100, and that is another excellent reason to pile into precious metals before the rest of the herd.

Sell in May and buy gold and silver?

That old stock market ruse has it that you should sell in May and go away. With the bear market rally on its last legs that might be excellent advice this year.

However, there is a new twist. Gold and silver have just broken out on the upside and there is good reason to think we could be close to a parabolic ascent for precious metals.

Prices going up

All the ducks are in line. Alternative investments are all under pressure, including US treasuries and cash in the form of the US dollar. At the same time, the money supply is exploding.

Moreover buyers from the world’s top hedge funds to countries like Russia, China and Saudi Arabia are serious about building up their gold stocks. Retail buyers too are increasingly cashing out and buying into gold and silver.

The summer is normally a weak time for precious metals but you have to wonder about 2009. It is the cycle of Indian festivals that produces summer weakness. But this is a year when investment demand has taken over the market, and it could be very different.

Those gold bugs following their traditional chart patterns are probably going to miss the biggest boat since Midas found that everything he touched turned to gold. If ever there was a moment to buy and hold this is it.

Gold stocks

More sophisticated investors will now look quickly for ways to gear up into the gold rush. Gold stocks outperformed the metal last week, and should provide positive gearing, even in a falling stock market.

Silver is a way to lever gold prices and has also continued to outperform the yellow metal. Silver is simply a much smaller market so the effect of increased demand is that much stronger on prices. Unless the fundamentals of supply and demand on price fail to operate this is going to be repeated in this gold bull market.

Marc Faber has said investors should also start looking at the junior exploration stocks, and there is much value to be had in the holders of gold and silver claims. The value of claims – actually good and bad ones – is even more leveraged against the gold price than silver.

Gold hovers near two-month high

Posted by Webmaster | World Gold News | Sunday 24 May 2009 9:22 pm

Gold traded little changed near the highest in more than two months as a weakening US dollar spurred interest in the precious metal as a haven investment.

Holdings in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, rose for the first time since May 13. Assets stood at 1,118.76 metric tons on May 22, according to figures on the company’s website. The Dollar Index, which measures the greenback against six major trading partners, was little changed after falling to the lowest this year on May 22.

”With a global recovery unlikely to be smooth, the two main risks to most asset values are inflation and the US dollar — both of which are decisively gold-positive,” Morgan Stanley analysts led by Hussein Allidina said in a report.

Gold for immediate delivery was at $US956.35 in Singapore. The metal advanced to $US961.33 on May 22, the highest since March 20.

The US dollar approached its weakest level this year against the euro before the release of an Ifo Institute for Economic Research report today that economists say will show German business confidence rose in May, extending April’s rebound from a 26-year low. The dollar was at $US1.4007 per euro from $US1.3998 in New York on May 22, when it tumbled to $US1.4051, the lowest level since Jan. 2.

Twenty-three of 30 traders, investors and analysts surveyed by Bloomberg News, or 77 per cent, said gold would climb this week. Five forecast lower prices and two were neutral.

Among other precious metals for immediate delivery, silver gained 0.3 per cent to $US14.7250 an ounce, platinum was up 0.2 per cent at $US1,159 an ounce and palladium was little changed at $US233.50 an ounce in Singapore.

Posted by Webmaster | World Gold News | Saturday 9 May 2009 10:11 pm
Gold’s popularity over the centuries has endured wars, plagues, civil unrest and all sorts of other perils. But would gold prices hold up well in a prolonged deflationary spell? For the first time in several decades, we’re starting to find out. With the economy shrinking sharply over the past two quarters, inflation pressures have faded. The U.S. Consumer Price Index has dropped in four of the past six months, and the inflation rate for 2008, at 0.1 percent, was the lowest reading since 1954.  Gold prices also have retreated, slumping from a 2008 peak of $1,011 an ounce to a current price of about $915. “Gold is unusual in that it’s an asset that likes inflation,” Natalie Dempster, head of North American investments for the World Gold Council, an industry group, said during a recent stop in Phoenix. Even so, gold has bounced back from a low near $700 an ounce in November. The metal has held up better than many other commodities amid the deflation headwinds. Demand for gold isn’t just a function of inflation and deflation, of course. More than anything, gold is used in jewelry, with 68 percent of the metal destined for this use, Dempster said. Industrial uses such as electronics take an additional 19 percent, leaving a fairly small remaining slice for coins, bars and the like. Much of the demand, especially from places such as India and China, isn’t directly tied to U.S. consumer-price levels. The supply side of the equation, meanwhile, is affected by mining activity and new discoveries, of which there haven’t been many lately. “Mine production has been in a downtrend since 2001,” Dempster said. Supplies also are influenced by the amount of gold recycled as people sell jewelry to raise cash. “A fair amount of scrap has been coming back onto the market,” she said. With the economy showing signs of life, some observers think we may be near a crossroads where inflation picks up.

Diversification suggested

Russell Biehl, a chartered financial analyst at Classic Investment Management in Scottsdale, sees higher inflation ahead as the economy works through its rough patch and government spending kicks in. He suggests investors diversify a slice of their holdings into inflation-sensitive assets, including gold. “Eventually, the Federal Reserve will gain traction (in inflating the economy) with all the money they’re printing,” he said. Jay R. Penney, a chartered financial analyst in Scottsdale, also sees an investment role for gold.

‘A compelling story’

“As a dollar hedge, it is a compelling story for a portion of a portfolio,” he said. “I do expect inflation to rise, and dramatically so in the future, if things continue in Washington as they are headed.” A case could be made that investors generally are underexposed to gold. Dempster estimated in 2007 that, on average, individuals and institutions held only about 0.5 percent of their portfolios in gold. Long-term demand for the metal would increase to the extent that investors add to their allocation. Volatility in the financial markets and extreme uncertainty over the economy have raised awareness of gold as something worth holding to supplement positions in stocks, bonds and the like.

Economic uncertainty

Because gold doesn’t move in sync with the financial markets, the metal provides a hedge in times of instability and unease. So, how much gold should you hold? “If you’re concerned about future inflation, you might want 8 to 10 percent of your portfolio in gold,” Dempster said. “But even 2 to 4 percent can have a diversification impact.”