Daily Gold Update

Source: MarketWatch

New York— Gold futures posted modest gains Friday, as weakness in the dollar, which fell against the yen after China widened the yuan's trading band, underpinned demand for the precious metal.

Gold for June delivery closed up $4.80 at $662.0 an ounce on the New York Mercantile Exchange. However, gold futures have lost more than $10 on the week.

"The dollar giving up some of its recent gains certainly propped gold higher today," said David Meger, senior metals analyst at Alaron Trading. "It prompted a bit of short covering in the precious metals market."

There has also been "a lot of speculation about the bank of China tightening their monetary policy," Meger said. That speculation will likely be a negative force towards both the base and the precious metals in the near term.

The People's Bank of China said Friday it's widening the trading band for the yuan, hiking interest rates and increasing banks' reserve requirements, as authorities act to quell a rapidly rising stock market and put a brake to the fast-growing mainland economy.

"This [move was] in an effort to curb rampant speculative fever and overheating conditions in its markets," said Jon Nadler, analyst at Kitco Bullion Dealers, in a research note.

"We cannot over-emphasize the bearish implications of this initial move to curb the euphoria that has buoyed speculators for so long," Nadler said.

Japan's yen gained on the news from China. The dollar traded mixed against other major currencies ahead of a report expected to show U.S. consumer sentiment fell slightly this month.

Gold "keeps looking for reasons to declare the worst of the drop as being over," Nadler said. "Alas, there is plenty for gold to content with, in its quest for turning away from the lows it finds itself near."

Other metals prices also posted gains. July platinum closed up $8.30 at $1,326.20 an ounce. June palladium rose $4.85, or 1.4%, to close at $362.25 an ounce. July silver ends up 12.0 cents at $13.003 an ounce.

July copper rose 1.70 cents at $3.3235 a pound Friday, but the contract lost 28 cents on the week. On Thursday, copper futures sank to their lowest level since early April, with the June contract tumbling 11.6 cents, or 3.4%, to close at $3.3065 a pound.

"We still would not want to bottom-pick here despite some technical indicators showing that we are oversold," said Edward Meir, analyst at Man Financial, in a research note. "Instead, we prefer to wait for prices to hold, turn, and stay higher before initiating any length."

In the long term, metals prices should move higher over the course of the year in light of relatively tight supply-demand balances, Meir said.

In energy trading, crude-oil futures rose as expectations of high demand for gasoline during the U.S. summer driving season and global political tensions provided support for prices.

On the supply side, gold warehouse inventories were unchanged at 7.71 million troy ounces as of late Thursday, according to Nymex data. Silver supplies fell by 47,582 troy ounces to stand at 132 million troy ounces, while copper supplies were unchanged at 31,379 short tons.

Indexes tracking the metals sector were flat to higher in early action Friday.

The Amex Gold Bugs Index rose 1.8% to 328.32 points and the CBOE Gold Index gained 1.8% to 142.10 points, while the Philadelphia Gold and Silver Index rose 1.4% to 136.79 points.

As for sector exchange-traded funds, the StreetTracks Gold Trust ETF rose 0.7% to $65.49, the iShares Silver Trust ETF gained 0.9% to $128.82 and the Market Vectors-Gold Miners ETF rallied 2.2% to $39.09.