SAN FRANCISCO (MarketWatch) — Gold futures settled higher on Monday, with the market recouping part of the 3% loss it suffered at the end of last week.
Gold’s gains also came as Deutsche Bank said gold’s correction has probably neared an end, while a miners strike helped rally platinum and palladium prices.
Gold reaches for gains following 3% selloff.
Gold for August delivery GCQ3 -0.16% added $22.20, or 1.8%, to settle at $1,234.90 an ounce on the Comex division of the New York Mercantile Exchange.
Silver for September delivery SIU3 -0.54% also finished higher, adding 30 cents, or 1.6%, to $19.04 an ounce after Friday’s 4.9% loss.
Gold was seeing “a corrective, short-covering bounce from Friday’s strong losses,” said Jim Wyckoff, senior analyst at Kitco.com, in emailed comments. The metal benefited from “some safe-haven demand on Egypt unrest, too.”
Investors on Friday lopped off $39.20, or 3.1%, from gold prices on worries the U.S. Federal Reserve later this year will start tapering its program of bond purchases, which analysts have said has been a source of support for gold prices.
Those worries were reinforced after the U.S. Labor Department said the economy created 195,000 new jobs in June. Economists surveyed by MarketWatch had expected, on average, the addition of 155,000 jobs.
The Fed has said it may reduce the pace of government-debt purchases from its current level of $85 billion a month if the economy continues to improve in line with its expectations.
The Fed’s quantitative easing program has helped support the metal as QE tends to pressure the dollar and can lead to inflation. Gold is often seen as a hedge against inflation.
“Since inflation remains subdued at present, investors have ditched gold and bought off on the Goldilocks scenario that inflation will not run too hot or too cold, but be just right no matter how accommodative global central banks become,” said Elliott Orsillo, co-founder and portfolio manager at Season Investments LLC. “This philosophy seems nearsighted to us, and we still think gold should play an important part of any investor’s well diversified portfolio.”
Investors will look for more insight into the Fed’s outlook for monetary stimulus whenminutes from its meeting in June are released on Wednesday.
There were a few gold calls Monday.
Among them, Deutsche Bank strategists predicted that the gold correction may be largely over. Lessons from history suggest the extent of the price correction is “still some way short” of the percentage falls that happened in 1980-1,” wrote strategist Michael Lewis.
Tuesday July 9, 2013 2:26 PM
(Kitco News) - Gold prices ended the U.S. day session moderately higher Tuesday, supported in part on inflation news out of China, more short covering and some technical follow-through buying strength from Monday’s gains. A stronger U.S. dollar index did limit the upside in both gold and silver markets Tuesday. August gold was last up $6.70 at $1,241.60 an ounce. Spot gold was last quoted up $6.10 at $1,243.75. September Comex silver last traded up $0.082 at $19.12 an ounce.
Gold prices were boosted Tuesday on news that China’s inflation rate heated up a bit in June. China’s June consumer price index was up 2.7% on an annualized basis, compared to a 2.1% rate in May and above the consensus forecast for a 2.5% rise. Gold and other hard assets have traditionally been used as a hedge against inflationary price pressures. The China inflation news coincides with the recent surprisingly sharp rise in U.S. bond yields and home mortgage rates. While still not perceived by the world market place to be problematic, inflation is a phenomenon that creeps up and is not recognized as a serious problem until it already has a strong grip around the throats of major economies. Many market watchers have never been convinced that the past few years of the major central banks of the world printing money that such would not come back to produce a strong inflationary bite.
The civil unrest in Egypt is still a front-burner issue for the world market place. There were no major developments Tuesday, but the situation still has traders uneasy. The crisis in Egypt could quickly escalate and even spread to other countries in the Middle East. Gold has seen some safe-haven investor demand due to the recent political upset and violence in Egypt.
The market place is awaiting the Wednesday release of China’s latest trade report and the minutes of the last U.S. Federal Reserve FOMC meeting. These two data points are the most important economic readings of the week.
The U.S. dollar index was sharply higher Tuesday and hit a fresh three-year high. The overall strong technical posture of the dollar index remains a major bearish underlying factor for the metals. Nymex crude oil prices were slightly higher Tuesday afternoon. Prices hit a 14-month high Monday. With Nymex crude trading above $100 a barrel, that is a bullish underlying factor for the raw commodity sector, including the precious metals.
The London P.M. gold fix is $1,255.50 versus the previous London P.M. fixing of $1,235.25.
Technically, August gold futures prices closed near mid-range Tuesday. The gold bears still have the solid overall near-term technical advantage, however. Gold prices are in an eight-month-old downtrend on the daily bar chart. The gold bulls’ next upside near-term price breakout objective is to produce a close above solid technical resistance at last week’s high of $1,267.00. Bears' next near-term downside breakout price objective is closing prices below solid technical support at the June low of $1,179.40. First resistance is seen at Tuesday’s high of $1,258.70 and then at $1,267.00. First support is seen at Tuesday’s low of $1,232.00 and then at Monday’s low of $1,214.40. Wyckoff’s Market Rating: 2.0
September silver futures prices closed near mid-range and saw tepid short covering in a bear market. Silver bears still have the solid overall near-term chart advantage. Prices are in an eight-month-old downtrend on the daily bar chart. Bulls’ next upside price breakout objective is closing prices above solid technical resistance at last week’s high of $20.075 an ounce. The next downside price breakout objective for the bears is closing prices below solid technical support at the June low of $18.17. First resistance is seen at Tuesday’s high of $19.485 and then at $19.83. Next support is seen at Tuesday’s low of $19.93 and then at Monday’s low of $18.67. Wyckoff's Market Rating: 1.5.
September N.Y. copper closed down 335 points at 306.60 cents Tuesday. Prices closed near mid-range. The stronger U.S. dollar was bearish for copper Tuesday. Copper bears have the solid overall near-term technical advantage. Copper bulls' next upside breakout objective is pushing and closing prices above solid technical resistance at last week’s high of 317.90 cents. The next downside price breakout objective for the bears is closing prices below solid technical support at the contract low of 298.55 cents. First resistance is seen at 310.00 cents and then at Tuesday’s high of 311.60 cents. First support is seen at Tuesday’s low of 302.50 cents and then at 300.00 cents. Wyckoff's Market Rating: 1.5.