Gold ends week above US$1,150 on buying interest despite stronger Dollar
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INTERNATIONAL. Gold prices ended higher Friday as a late session rally driven by strong buying interest pushed the metal above the US$1,150-mark despite a stronger US dollar.
Traders said gold's ability to stem losses despite weaker equities and oil prices, and a stronger Dollar, signal strong buying interest.
Gold was under pressure earlier in the session as the dollar rose for a second straight session as investors cut risk exposure. "Technical buying and short covering started a late session rally, Frank McGhee at Integrated Brokerage Services, told Reuters, adding that strong buying may boost prices early next week.
On the Comex division of the New York Mercantile Exchange, December gold futures settled US$$4.90 higher at US$1,146.80 an ounce (last Friday's close US$1,116.70), for a weekly increase of 2.69%, ranging from US$1,132.50 to US$1,148.50.
The December contract hit a record US$1,153.40 on Wednesday. After Friday's settlement, it hit a high of US$1,150.50. Last week's high was US$1,123.4.
Spot gold closed US$6.3 higher or 0.55% at US$1150.9 for a weekly gain of US$32.4, or 2.9%.
The yellow metal has now gained in eleven out of the past thirteen weeks, in the past six trading sessions and in the past three weeks.
Gold for immediate delivery rose 2.9% this week, 8.70% in the last 30 days, by 8.7% in the quarter to the end of September and 54.57% year-on-year.
The ICE Futures US dollar index, which measures the dollar against other major currencies, rose 0.4% on Friday. Gold has traditionally shared a strong inverse relationship with the greenback, while also being a useful hedge against rising consumer prices.
Gold's uptrend remained intact this week and may have even accelerated as the correlation with the dollar turned positive, according to analysts
Dollar strength makes gold and other commodities priced in the US unit less attractive to non US investors. But the dollar's gains proved fleeting and the market has kicked on strongly again having found decent support at the lower levels.
It looks like a very well-behaved uptrend," Phil Roberts, analyst at Barclays Capital, told Reuters.
"We do not expect much direction from currencies," says Friday's gold-market comment from Standard Bank analyst Walter de Wet.
"In fact, correlations between commodities and the Dollar have fallen substantially. Look to equities for direction, de Wet said."
La Salle Futures Group trader Matt Zeman said investors are not being fooled by any short-term gains in the US currency and can see a bright future for gold.
"No one has faith in a sustained dollar rally," he told Business Day.
"Gold just seems resilient in the face of a stronger dollar. This is a big bullish signal. People want gold to go higher," Zeman said.
Gold has also woken up in other denominations. Gold priced in euros has hit its highest in almost nine months, while sterling-priced gold has also jumped to its highest since February. Gold priced in British Pounds hit a new all-time record at the Friday AM Gold Fix of £690.83 per ounce and £691.04 at the PM Fix.
Agreed as a clearing and benchmark price twice each day, the Fix has risen by 280% for UK gold buyers from this time 10 years ago.
The price of gold has risen by 19% vs. the Dollar since the start of Septembre priced against a basket of currencies, the Dollar itself has lost 4.5% of its value since then.
The S&P 500 index of US stocks has risen 7.3% in that time.
Gold, up over 29% this year, has outperformed US stocks and bonds as investors seek to protect their wealth against currency debasement and an inflation threat.
"Higher highs and higher lows keep trend followers looking for a continued bullish move," Scotia Mocatta said in its daily note on Thursday. "Our measured target is US$1,188."
"Gold feels frothy today," writes Société Générale analyst Dylan Grice in a detailed report, "but [last month's] Indian purchase of IMF Gold eerily parallels the French purchases of the late 1960s. And ill policy winds are blowing in gold's favour."
Claiming that "There is a case for gold being 'cheap' at current prices" thanks to what he calls the "market displacement" of huge monetary expansion worldwide, Grice believes the gold price has yet to undergo four further stages of a "Minskian mania" – boom, euphoria, crisis and finally revulsion.
Encouraged by India's decision, "We've had the displacement and are only now entering into the boom phase," says SocGen's behavioral analyst, who replaced James Montier at the French bank's London strategy team in September. "The mania phase lies well ahead. But that is a long way off."
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