Source: Marketwatch
San Francisco— Gold futures climbed Wednesday to close at a five-week high, underpinned by weakness in the dollar and physical demand, even as Iranian President Mahmoud Ahmadinejad triggered a decline in crude-oil prices by saying captured British sailors would be freed.
"Gold bullion received quite a surprise vote of confidence during Wednesday's trading session," said Jon Nadler, an analyst at Kitco.com, in e-mailed commentary. "Just when the bulls expected to see a large decline in prices due to the resolution of the Iran-U.K. crisis, they instead got their long-standing wish of seeing gold surpass $672 per ounce come true."
Gold for June delivery rose $7.70 to close at $677.40 an ounce on the New York Mercantile Exchange. It climbed to $681 earlier, its strongest intraday level since March 1.
"The current rise in the gold price is overdue, but overhead resistance got in the way," said Julian Phillips, an analyst at GoldForecaster.com. "It is now out of the way so the jump is happening now."
"This is caused not solely by the situation in Iran but a combination of factors," he said in e-mailed comments.
The factors include the fall in the dollar and expectations for more declines, oil prices holding above $60 a barrel, strong physical demand for gold at just under $660 and overall "global uncertainty," especially in the Middle East, he said.
Indeed, "there has been an aggressive shorting campaign to keep gold below $666," said Peter Grandich, editor of the Grandich Letter, in e-mailed comments. But "like all previous capping exercises, this one is failing also thanks to an incredibly strong physical market."
The dollar fell against the euro and yen Wednesday after reports showed non-manufacturing sectors of the U.S. economy expanded at a slower pace in March while factory orders rose less than forecast in February. The weakness in the greenback helped fuel investment demand for gold.
Meanwhile, crude-oil futures closed lower Wednesday after Ahmadinejad pardoned 15 U.K. Navy personnel being held captive by Tehran and said they would be released, ending a diplomatic crisis that had raised concerns about oil supplies in the region.
But oil's losses were limited by gains in gasoline futures, which climbed on the heels of an eighth-weekly drop in U.S. motor gasoline supplies.
Iran's Ahmadinejad used a news conference for the Persian New Year to announce that the British sailors would be released. The announcement was not a major surprise; the U.K. government had said earlier it believed Iran would like an "early resolution" to the crisis.
The 15 sailors were seized by armed Iranian forces 13 days ago and charged with trespassing in Iranian waters. The U.K. had insisted they were in Iraqi waters, patrolling under a United Nations mandate when they were taken prisoner.
London impact
Neal Ryan, director of economic research at Blanchard said "it's the physical supply side of the market in London that's been influencing prices so much the last few weeks."
"Gold sales have been swamping the market the last three weeks … and the price has held up considerably well and even increased under that pressure," he said in e-mailed comments. "I think what we've seen today is the end of that selling pressure."
So, "we're going to see prices jump up and challenge the May '06 high in 2-3 weeks in my opinion," he said.
'Gold sales have been swamping the market the last three weeks … and the price has held up considerably well and even increased under that pressure. I think what we've seen today is the end of that selling pressure.
Against this backdrop, other metals prices climbed along with gold, though palladium was a lone loser, with its June contract closing down $1.60 at $354.15 an ounce.
May silver rose 19 cents to end at $13.62 an ounce and July platinum rose $6.60 to close at $1,258.90 an ounce.
May copper tacked on 7.3 cents to close at $3.3875 a pound, ending at a level not seen since late October. On Tuesday, copper futures climbed more than 4% to close at their highest level in five months, piggybacking on growing global demand and concerns over falling supplies.
"Overall, we will be on the lookout for [base metal] profit-taking and producer selling in the near term, but as things stand, it looks as though dips will be well supported," said William Adams, analyst at BaseMetals.com.
World gold investment falls in 2006
Meanwhile, world investment in the gold market declined by 13% to 743 metric tons in 2006, according to GFMS' gold survey report released Wednesday.
World investment comprises of implied net investment, bar hoarding and coin fabrication demand, the report said. But in "approximate value terms, the figure was up by 18% year-on-year to $14.4 billion.
"Dollar weakness, geopolitical tensions and other commodity prices remained im
Share This Post
Choose Your Platform: Facebook Twitter Linkedin