Source: Reuters
NEW YORK, April 18 — COMEX gold churned to a two-week high early Thursday, gaining technical momentum as continued weakness in the U.S. dollar increased the bullion purchasing power of overseas investors.
June gold <0#GC:> at 0929 EST was up $2.70 at $305.50 an ounce, rallying from a low of $302.80 to $305.80, its highest since April 3, with weak shorts covering on the break of last Thursday's peak at $304.20 and funds adding to long positions.
"It looks like we've got short-covering driving this higher and we also broke through the recent high," said a floor broker. "It's all technical buying."
Spot gold
The U.S. dollar index, watched by commodity analysts for its inverse correlation with gold, broke lower Thursday and was last at 116.26, its lowest since Jan 4.
The greenback continued to erode against the Euro and yen. Firm commodity currencies like the Australian dollar and South African rand made it even less attractive for gold producers, who are already scaling back hedging activity, to sell.
The dollar was losing support after Federal Reserve Chairman Alan Greenspan indicated Wednesday that the central bank was in no rush to raise interest rates because the strength of the current economic recovery was unclear.
A rise in claims for unemployment benefits this week to 445,000 claims from 444,000 last week contributed to the dollar's weak tone, indirectly helping gold, a dealer said.
"That probably means the economy won't heat up and doesn't need any interest rate dampening, I guess, just yet," he said. "Lower interest rates — weaker dollar. Weaker dollar — stronger gold."
Aggressive Fed easing last year contributed to gold's rally this year. Short-term U.S. interest rates are at the their lowest in 40 years, meaning a non-interest-rate-bearing asset like gold looks better by comparison.
The 11 Fed cuts in 2001 also narrowed bullion's forward premium, meaning gold mining companies and speculators could no longer earn much carry selling gold short.
The market now has its sights on the April 3 high in June gold at $308, hit amid safe-haven buying as open warfare broke out between Israel and the Palestinians. Right behind that level lies the peak at $309.30 from Feb 8, the day spot gold hit a two-year high of $307.50.
But a massive fund long may slow the ascent. Last week speculators were net long about 113 tonnes worth of futures.
May silver <0#SI:> was up 3.5 cents at $4.485 an ounce, trading a $4.43-$4.495 range. Spot silver
Platinum continued to rally amid worries about the potential disruption of supply if workers strike again at Anglo American Platinum's giant Rustenburg precious metals refinery in South Africa.
Building on gains in TOCOM trade overnight, NYMEX July platinum <0#PL:> was up $7.20 at $552 an ounce, making a new contract high at $555. Spot platinum
Consumer interest in platinum, used in automobile catalytic converters and jewelry, is strengthening and the borrowing markets have tightened considerably over the past week.
AGE Note: A declining U.S. Dollar relative to foreign currencies is one of the key ingredients for higher gold prices. We have been anticipating this for over a year now. The many dollar related special reports in our library attest to this. Gold continues to set higher highs and higher lows and a nice steady uptrend is developing.
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