Stock Market Watch

Gold Prices Settle Higher

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Gold prices rose on Tuesday as poor house sales data weighed on the U.S dollar even as euro gained following successful bond auctioning in the Netherlands.

Gold for June delivery added $11.20, or 0.7%, to close at $1,643.80 an ounce on the Comex division of the New York Mercantile Exchange.


The gains come after 0.6% decline on Monday following 1% plunge in the previous week. After a period of very lull trading, the metal eventually found some support as very poor housing sales data put the pressure on the greenback.

The dollar and gold are inversely related. Whenever dollar weakens against major currencies, the demand for gold increases as the commodity becomes cheaper to those traders who deal in currencies other than the dollar.

Commenting over gold’s rebound, James Cordier, a portfolio manager with Optionsellers.com in Florida, said, “The day’s macroeconomic reports showed an incredibly weak housing market, hitting the dollar and benefiting gold”.  Cordier also believes that continued pouring of poor economic data could possibly mean Federal Reserve providing another round of quantitative easing in the coming months.

On Tuesday, the U.S. Commerce Department data showed sales of new U.S. homes dropping 7.1% in March, though the drop was due to a revision higher for February.

Bad news kept coming an hour later as a gauge of consumer confidence declined for a second month. The Conference Board consumer sentiment index stood at 69.2 in April, down from a revised reading of 69.5 in March.

Meanwhile, the dollar index – a barometer which measures greenback’s performance against basket of six most traded currencies, recently traded at 79.217, down from 79.406 in late North American trading Monday.

However, despite the rebound, analysts feel that there’s lot of scope for the metal to advance further. The trading volume has been thin in recent times as rising economic uncertainty and fed’s less dovish tone on monetary easing, curtailed the risk appetite of investors. Besides, weak physical demand for gold also weighed on metal’s prices.

In its note to clients, analysts at VTB Capital, London, said, “India’s jewelry demand and interest in physical gold in one of the world’s top buyers is very slack in spite of the (Hindu festival) Akshaya Tritiya festival this week, which is a concern”.

Despite the gains made, analysts at VTB Capital expect price to still fluctuate though. “We still expect volatility to gain ahead of Wednesday’s (Federal Open Market Committee) April meeting, with market participants seeking further insight into the Fed’s monetary policy outlook which will ultimately influence rate expectations and the dollar trade,” added the note.

The Federal Reserve is expected to make announcement over the interest rate on Wednesday, followed by a news conference with Fed’s Chairman, Ben Bernanke. Market participants are hoping that central bank might provide another round of quantitative easing after series of lackluster economic and job related data, had cast doubt over the strength of the U.S economic recovery.

The SPDR Gold Trust (ETF) (NYSE: GLD) ended the day 0.14% higher at $159.30, and the Market Vectors ETF Trust (NYSE: GDX) ended the day 0.22% higher at $45.14.

Among some other precious metal markets, most metals settled higher as well, with May silver climbing up  21 cents, or 0.7%, to close the day at $30.75 an ounce. May copper futures gained 5 cents, or 1.3%, to settle at $3.67 per ounce.

Platinum and palladium, however, posted losses with July platinum falling $8.20, or 0.5%, to settle at $1,548.10 an ounce. The close was platinum’s lowest settlement since late January.

Palladium for June delivery edged lower $5.10, or 0.8%, to settle at $665.80 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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