Stock Market Watch

Gold Futures Settle Higher in Final Trading Session of 2011

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Gold futures settled higher in the final trading session of 2011on Friday, as the euro rebounded against the dollar and investors covered short positions a day after the previous metal fell to a six-month low.

Gold finished around 10% in 2011, making it the 11th straight annual gain for the precious metal. However, prices fell nearly 18% after hitting a record high of $1,920.30 an ounce back in September 2011. Gold also posted its first quarterly loss in over three years in the fourth quarter of 2011.


Michael Matousek, Senior Trader at U.S. Global Investor, told Reuters on Friday that gold’s technical set-up since late Thursday could be start of a bullish reversal and a short-term bottom. Matousek further said that it is completely reasonable to be up $100 from here by the end of January or February on technical support.

On Friday, spot gold rose 1.2% to $1,564.09 an ounce. Despite Friday’s gains, spot gold fell nearly 10% in December.

Gold futures for delivery in February on the Comex division of the New York Mercantile Exchange climbed $25.90 to settle at $1,566.80 an ounce. Friday’s gains came following six straight sessions of losses.

Although the precious metal rose sharply on Friday, technical factors indicate gold’s momentum has turned bearish. Gold’s 20-day moving average dropped below its 200-day moving average, which is a bearish signal. The brief foray into bear market indicates that gold could see further pullback.

The 20-day moving average fell below the 200-day moving average on Thursday. Technical analysts termed it a “death cross” for gold, as short-term momentum has turned more negative than long-term momentum and could show that the current downtrend is pervasive.

Adam Sarhan, Chief Executive of Sarhan Capital, told Reuters that any time there is a death cross, the market is telling that the underlying strength has changed from bullish to bearish.

Sarhan further said that when you start seeing a lot more bearish technical events occurring, more and more short-term traders are inclined to selling their positions.

In 2011, gold had a return of 11%, which is decent considering the volatility in global markets during the year. However, the precious metal underperformed 10-year Treasury s, which returned around 17%, Brent crude, which returned around 14%, and German 10-year bunds, which returned an impressive 31%.

Ole Hansen, Senior Manager at Saxo Bank, told Reuters that we need to see the hot money from speculators, we need to see real money from the money managers coming back to the market. Hansen said that speculators and money managers were absent throughout December.

Gold ETFs ended higher on Friday, with the SPDR Gold Trust (ETF) (NYSE: GLD) closing 1.10% higher at $151.99, the Market Vectors ETF Trust (NYSE: GDX) closing 0.45% higher at $51.43, and the iShares Gold Trust (ETF) (NYSE: IAU) closing 1.06% higher at $15.23.

For 2011, the SPDR Gold Trust rose 9.57%, the Market Vectors ETF Trust fell 16.33%, and the iShares Gold Trust ETF rose 9.57%.

Silver dropped in Friday’s trading session. At last check, spot silver was down 0.2% to $27.67 an ounce.

The iShares Silver Trust (ETF) (NYSE: SLV) ended the day 0.52% lower at $26.94, the ProShares Ultra Silver (ETF) (NYSE: AGQ) ended the day 1.37% lower at $41.61, and the ProShares UltraShort Silver (ETF) (NYSE: ZSL) ended the day 0.38% higher at $15.87.

For 2011, the iShares Silver Trust ended 10.74% lower, the ProShares Ultra Silver ended 47.53% lower, and the ProShares UltraShort Silver ended 59.6% lower.

Platinum rose 2.3% to $1,398.80 an ounce in Friday’s trading session, while palladium rose 4.2% to $650 an ounce in Friday’s trading session.

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edliston
Post Written By: Ed Liston

Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing in his yacht.


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Ed Liston

Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing.

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