Stock Market Watch

Gold Prices Rise

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Gold prices gained more than 1 % on Friday, taking its biggest one day in last one month leap as higher crude oil prices and falling dollar boosted the demand for the metal. The reversal in prices comes after a sharp sell-off in the last week.

The bullion dropped sharply in last four weeks as the Fed failed to provide any hint on further quantitative easing. As a result, huge outflows were witnessed from bullion exchange-traded funds and some funds exiting the gold trade. Owever, having lost $150 an announce in the same period, the bullion rallied sharply yesterday as home sales data showed that new home sales fell to a four month low.


According to James Rife, assistant portfolio manager at Haber Trilix advisors, which has $32 billion in assets “The jump today is somewhat sparked by the bad home sales, which increased the chance of the Fed bringing easing back to the system, and that’s why gold is reacting positively”.

While Spot gold  climbed up 1.06 percent, settling at $1,662.24 an ounce, recovering from a two-month low hit in the previous session, Futures for April delivery gained $19.90, closing at $1,662.40 an ounce in moderate volume.

Nevertheless, the momentum wasn’t strong enough to break the resistance of $1,670 level—nearing the high of its preceding seven sessions, commented Daniel Hwang, senior technical strategist at Forex.com.

According to Hwang, gold could face strong headwinds between $1,680 and $1,700, where many key moving averages converged after the metal’s pullback.  Gold has lost 2 % so far this month as investors preferred buying other assets class like equities and high yielding treasuries even as gold lost its safe haven appeal following market participant’s perception of better U.S economic outlook. Besides, Fed’s decision not to embark on fresh round of government-bond buying program or quantitative easing, keeping short term interest level low to stimulate consumption and demand—resulted in sharp sell off the metal in recent times.

While speaking to Reuters, one metals market commentator said “We think that quantitative easing and abnormally low U.S. interest rates have been a huge support for gold prices. It’s no surprise that the falling gold price recently has been accompanied by quite a significant rise in U.S. interest rates”. He further added “Gold doesn’t have a yield or a dividend or anything like that so as interest rates rise, your opportunity cost of holding gold increases.”

Meanwhile, investors on gold ETFs have left the market in doves. Many of them have cashed in on their positions very heavily this week, resulting in massive exit a quarter of a million ounces of gold in just one day, the biggest net one-day plunge since Dec. 23 2011 thereby bringing holdings to a one-month low of 70.431 million ounces.

On Tuesday, ETF holding hit its recording level of almost 70.9 million ounces. However, the widespread exodus from gold ETFs wiped out all previous buildups to date in March.

In a research note to investors, Edel Tully, a strategist at UBS wrote, “”Yesterday’s decline was the largest outflow since the beginning of the year, which pushed this month’s net position into negative territory: month-to-date, global ETFs are down by 155koz. Indeed, this now raises the question of whether this is the beginning of a much more substantial exit”.

The SPDR Gold Trust (ETF) (NYSE: GLD) ended the day 1.25% higher at $161.53.

Moving onto some other precious markets, Spot silver followed the upward trend in bullion market, climbing by 1.97 percent to settle at $32.17 an ounce.

Platinum moved up 0.54 percent to close $1,622.74 an ounce, even as palladium added 1.19 percent on the day to reach $656.47 an ounce.

 

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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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