Source: Marketwatch
San Francisco— Gold futures tallied a gain of more than $12 an ounce for the week to close at their highest level in seven trading sessions on Friday, buoyed by strong physical demand from overseas and recent weakness in the U.S. dollar.
"A phenomenon as welcome as the warm monsoons finally visited the gold market overnight: the buyer of gold jewelry in India," said Jon Nadler, an investment analyst at Kitco.com. "Local shoppers commenced spending on wedding-related presents, prompted not only by the calendar, but certainly by the recent sharp correction in bullion values."
The seasonal demand may prove to be just the tonic to stabilize gold prices.
"If this type of demand turns out to be robust and lasting, the gold market may regain its composure after a summer of indecision," Nadler said. And the Asian buying "may well counterbalance the gold tonnage that is or could still be coming out of various central bank vaults prior to September's end."
Gold for December delivery closed at $595.40 an ounce on the New York Mercantile Exchange, the highest closing price since Sept. 13. It was up $7.10 for the day and up 2.1% from last Friday's ending level.
Prices rose $12.20 in just the last three sessions, with over $2 of that rise seen on Thursday as the dollar weakened following a surprisingly weak Philadelphia Federal Reserve manufacturing report.
European central banks' gold sales rose to 34 metric tons in the last week, said Julian Phillips, an analyst at GoldForecaster.com. That would leave around 135 metric tons left until the ceiling is hit under an international sales agreement, he said.
The 2006 gold sales and lending quota was set at 500 metric tons for the year ending Sept. 27, according to a report earlier this week from U.S. Global Investors. The quota was set by the Washington Accord, a handshake-pact among certain central banks that places limits on each year's sales of gold from sovereign vaults.
Phillips said that while he's surprised at the sales in the last week, he doesn't believe "that the signatories will hit the market with the full tonnage available to them."
Elsewhere, the dollar was nearly unchanged against the yen but 0.2% lower against the euro.
And crude futures' November contract fell to a 10-month low.
Price signals
"The weaker dollar has prompted dealer buying in after-market and overnight trade," said James Moore, analyst at TheBullionDesk.com in London.
"While the scale of physical support that has emerged over the past two weeks is encouraging, I still think gold is vulnerable to further bouts of fund and institutional selling and a dip back to June's low of $542 is a viable risk," he said.
The metal needs to break through chart resistance at $597.20 — its 200-day moving average — and then retake the $600 level to break out of its current bearishness, Moore told clients.
Frederic Panizzutti, analyst at MKS Finance in Geneva, said he sees "the actual price level as an attractive opportunity, and obviously so do physical buyers."
"The downside risk remains real but starts to dissipate," he said. "More upside potential is likely especially if the upside momentum remains intact."
On the upside, he set his medium-term target at $620, while pegging downside risk at $572.
"More volatile and erratic session seem ahead of us," he warned.
Some analysts attributed some of the volatility over at least the past year to the launch of the first gold bullion-linked exchanged-traded fund in November 2004.
Other metals prices climbed also Friday.
December silver futures closed up 6.5 cents at $11.31 an ounce. The contract thus ended 4% above last week's close of $10.875.
October platinum rose $8.600 to close at $1,148.10 an ounce, finishing lower for the week, while December palladium rose $12.65 to end at $321.65 an ounce, spelling a gain for the week. December copper rose 1.2 cents to close at $3.4435 a pound, up 3.8% for the week.
On the supply side, gold inventories were down 78 troy ounces at 8.02 million troy ounces as of late Thursday, according to Nymex data. Silver supplies fell by 2.26 million troy ounces to 102.8 million and copper supplies rose by 1,455 short tons to 19,546 short tons.
In equities, indexes that track shares of metals and mining companies moved higher for a second session.
The Amex Gold Bugs Index climbed 1.1% to stand at 296.34. The Philadelphia Gold and Silver Index was at 126.37, up 0.9%, and the CBOE Gold Index climbed 1.3% to reach 128.77.
Individual index standouts included Harmony Gold Mining, shares of which traded up 5% at $12.63, and Gold Fields Ltd., up 3.2% at $18.03.
Share This Post
Choose Your Platform: Facebook Twitter Linkedin