Stock Market Watch

Gold Prices Rebound

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Gold prices gained 1% on Thursday along with some other precious metals as bargain hunters pushed up the metal’s demand to some extent as most investors preferred to sell their positions just ahead of a long Easter weekend.

Gold’s most actively traded contract, for June delivery, edged up $16, or 1%, to settle at $1,630.10 a troy ounce on the Comex division of the New York Mercantile Exchange.


The SPDR Gold Trust (ETF) (NYSE: GLD) ended the day 0.73% higher at $158.31, and the Market Vectors ETF Trust (NYSE: GDX) ended the day 1.07% lower at $46.20.

The Comex floor will remain close on Friday on account of Good Friday. Besides, markets in much of Europe will also be shut, celebrating Easter.

Although gold futures dropped earlier during the week, it got boost on Thursday from investors looking to repurchase previously sold contracts ahead of the three-day break, especially with March U.S. employment data expected to be released early Friday.

According to Sterling Smith, an analyst with Country Hedging, the market was cheap from where it was three or four days ago, which helped in drawing some bargain hunters.

Daniel Briesemann, analyst at Commerzbank, told Reuters that a countermove after the sharp price fall of recent days was to be expected. But Briesemann expects prices to trade lower, possibly below $1,600 an ounce after the current correction has run its course. He said that gold is highly correlated to equities and commodities at the moment and as long as the equity markets and the commodity markets are going down, so is gold.

Meanwhile, analysts at Scotiabank said in a research note that markets in general seem to be in risk-off mode as the Fed keeps quantitative easing on a back burner and the fact this has given the dollar a boost is likely to be headwind for gold and if we get a broad based sell-off then gold prices are likely to suffer as investors have to raise money against margin calls.

RBC Capital Markets wrote in a research note that traders will look to a long weekend with a bit of worry as, while the markets are closed tomorrow, the U.S. will release the all-important Nonfarm Payrolls.

Earlier during the week gold plunged almost 4%  with most investors selling off  their positions aggressively as minutes released from the Fed on Tuesday showed that it was not keen about further quantitative easing.

Generally those investors who are betting on lower prices prefer to sell their positions just ahead of the long weekend in order to avoid any impact arising out of unforeseen event.

On Friday, Labor Department’s statics on the U.S employment data both on public and private sectors will be keenly awaited by gold investors. Any improvement in the employment data will reduce any likelihood of Fed providing further monetary stimulus through its bond buying program (QE3).

Commenting over this matter, Ira Epstein, director of the Ira Epstein Division at the Linn Group, wrote in a research note, “U.S. financial markets are just beginning to factor in the adjustment to a pausing or lack of further quantitative easing and financial programs such as ‘Operation Twist”.  Epstein also added “The Fed seems very satisfied at this point in keeping its bullets in its gun holster”.

Besides, Fed’s monetary policy, another factor which has weighed on gold is strong dollar.  As the dollar appreciates against most traded currencies, dollar-denominated contracts like gold futures appear more expensive to international investors in their home currency terms, prompting them to shun commodities markets.

Meanwhile, Silver futures for May delivery, settled up 68.6 cents, or 2.2%, at $31.730 a troy ounce on Thursday.

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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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