Stock Market Watch

Gold Prices Rise Sharply

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Gold prices rose sharply on Thursday, gaining more than 1% as weak employment numbers and Fed’s assurance on further possible quantitative easing pushed up the metal’s price even as weak dollar helped gold to extend gains.

Spot gold edged up 0.8 percent to close at $1,657.06 an ounce on Thursday, while U.S. gold futures for June delivery settled up $18.20, ending the day at $1,660.50.


Although bullion is considered to be a safe haven asset, it has tracked riskier assets most of the year. Thus, the yellow metal continued to gain for the third successive day as U.S. equities climbed on upbeat corporate earnings reports.

On Thursday a data provided by the U.S. Labor Department showed that weekly jobless claims were unchanged from the last week, signaling the fragility in the U.S. economy thereby undermining the dollar.

Besides the weak data, the pressure on dollar continues to mount due to ultra low interest rates. On Wednesday, the Federal Reserve maintained its earlier stance on interest rates which is keeping the benchmark rate at nearly at record zero levels until 2014.

The dollar continued to trade lower against most traded currencies on Thursday, with the dollar index  a gauge on U.S. unit’s performance against basket of six currencies, slipped to 78.946 from 79.072 in late North American trading on Wednesday

Notwithstanding weak dollar, analysts are bullish on gold due to fed’s accommodative approach. After FOMC ended on Wednesday, the fed said that although they (the fed) felt everything is in order for now, the door is open for another round of quantitative easing, should the U.S. economy weaken in the future.

Earlier in February, gold crossed $1,790 an ounce level, as growing expectations over Fed’s monetary easing measures or bond buying program, boosted the dollar. However, the metal tumbled $150 an ounce since February as central bank’s less dovish stance on monetary easing weighed on gold.

According to James Steel, an analyst at HSBC Securities, “Although the Fed did not announce another round of easing, intentions to keep monetary policy at highly accommodative levels are a bullish case for gold prices.”

Matt Zeman, head trader and strategist with Kingsview Financial in Chicago believes that third round of quantitative easing (QE3) is still a strong possibility. He also feels that if gold closes above $1,671 an ounce level or so for at least two successive sessions in the short term, the market could see a push to the $1,800-an-ounce level.

Any monetary easing tends to lift the gold prices as increased money supply raises the inflationary fears.

However, gold could feel the pressure due to a lack of consumer buying, particularly in India, where a rise in domestic prices discouraged local jewelers and other consumers from purchasing.

Buying orders from Indian gold traders stayed subdued in most of April as prices hovered near their highest level in two months due to firm overseas markets and a weaker rupee.

Akshaya Tritiya- a Hindu gold buying festival saw metal’s sales dip by a half to 10 tons this year as buying sentiment was hurt by high consumer price inflation and weakness in the rupee.

 

Moving on to some other precious metal markets, most metals gained on Thursday as weaker dollar supported the broader metals futures complex.

The SPDR Gold Trust (ETF) (NYSE: GLD) ended the day 0.88% higher at $161.03.

Silver for May delivery gained 85 cents, or 2.8%, to end at $31.21 an ounce.

May copper futures rose 7 cents, or 1.8%, to settle at $3.77 a pound, the highest close since April 5. Platinum for July delivery edged up $22.90, or 1.5%, to settle at $1,570.20 an ounce. Palladium for June delivery added $17.55, or 2.7%, to close at $672.65 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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