Source: Marketwatch
San Francisco— Gold futures dropped $13 an ounce to close Wednesday at their weakest level in two months, as better-than-expected U.S. housing starts and industrial production in April lifted the dollar to an almost three-month high against the yen, weakening demand for the precious metal.
Gold for June delivery lost 1.9%, or $13, to close at $661.50 an ounce on the New York Mercantile Exchange, a level not seen since March 19.
July silver also dropped 2.9%, or 38.5 cents, to close at $12.93 an ounce. That was its lowest closing level since March 5.
"We believe the fall in gold reflected the performance of the dollar," said Julian Phillips, an analyst at GoldForecaster.com.
The dollar rallied across the board Wednesday, touching its highest level in almost three months against the yen after reports showed stronger-than-expected U.S. housing starts and industrial production for last month.
The number of new houses started increased by 2.5% to a seasonally adjusted annual rate of 1.528 million, the Commerce Department reported Wednesday. But building permits fell 8.9% to a seasonally adjusted annual rate of 1.429 million, the lowest since June 1997.
Meanwhile, industrial production rose 0.7% in April. Utility output rose 3.5% in April due to a cold spell, the Federal Reserve said. This followed a sharp 7.5% drop in March, as temperatures were relatively warm.
"Funds are obviously increasing their yen carry trade loans given the weakness in the Japanese yen," said Ned Schmidt, editor of the Value View Gold Report. "Those monies are flowing into paper assets."
And "all of this is creating an excellent buying opportunity" for gold, he said.
"The average price of gold in April exceeded the previous high average monthly price in May of last year, confirming that a new leg in the gold market is about to start," he said.
"This week's oversold condition in gold should be used to buy," Schmidt said.
Major bottom
Indeed, "while it's the worst seasonally favorable period for gold (May-August), numerous technical indicators are screaming for a major bottom as early as today or on a wash-out to $650," said Peter Grandich, editor of the Grandich Letter, in e-mailed comments.
"The bullish sentiment among gold timers is almost nil — another bullish factor that says we're close to a major bottom," he said.
The June gold futures contract had gained $4.40 on Tuesday, moving inversely with weakness in the dollar after data showed that U.S. consumer inflation eased a bit in April.
"The emergence of support around $665 yesterday is encouraging, with further support expected at $662 to $660 and around the 100-day moving average at $658.75," said James Moore, metals analyst at TheBullionDesk.com, in a research note.
"However, further failures to climb towards key resistance pegged at $694 might encourage another round of long liquidation from fund players," he said.
Other metals prices were lower Wednesday. June palladium shed 95 cents to close at $357.50 an ounce and July platinum fell $13.80 to end at $1,325.80 an ounce.
"Despite forecasts for mine supplies to step up across the year, [platinum] remains extremely sensitive to supply disruptions with the metal moving higher yesterday as Norilsk Nickel halted shipments from [its Arctic port of] Dudinka," Moore said.
"The still tight fundamentals of platinum will offer a strong floor in the coming session with chart support pegged at $1,312/$1,305, while chart resistance is expected at $1,338," he said.
Copper falls sharply
Copper futures were the biggest percentage loser among the metals futures Wednesday. July copper fell 11.5 cents, or 3.3%, to close at $3.4225 a pound. That was its lowest close since April 5.
"Copper participants are still trying to come to grips with the latest copper import figures out of China," said Edward Meir, metals analyst at Man Financial Energy, in a morning note.
In the previous session, copper rose 1.2% to $3.54 a pound, boosted by news that Chinese copper imports in April surged 68% year-on-year to 304,672 tons. To date this year, Chinese copper imports are 61% above last year's figures at 1.08 million tons.
"China's high level of imports may dampen local prices, but it looks a bullish development overall," said William Adams, analyst at BaseMetals.com, in a morning note. "With China importing copper in all formats, from ores to refined metal, it does look like China is restocking on a large scale."
The numbers "suggest China is confident about its demand and secondly it should raise eyebrows in the rest of the world that maybe China has been taking advantage of the lower prices since the start of the year and is soaking up the excess metal that came to the surface during last year's global destock," Adams said.
Bart Melek, global commodity strategist at BMO Capita
Share This Post
Choose Your Platform: Facebook Twitter Linkedin