Gold futures edge up as global equities fall
San Francisco (Jan 31) A global equity rout on Friday provided a lift for gold futures, leaving the precious metal on track for a monthly gain.
Gold for April delivery rose $5.20, or 0.4%, to $1,247.70 an ounce on the Comex division of the New York Mercantile Exchange.
Gold futures have gained roughly 3.8% since the end of December, based on most-active contracts tracked by FactSet. They’ve lost around 1.3% for the week.
March silver advanced 10 cents, or 0.5%, to $19.235 an ounce. Futures prices have lost 2.7% for the week and were trading 0.7% lower for the month.
“There is a serious money flow from the equity market towards gold, and we think that this could continue for the next couple of weeks,” said Naeem Aslam, chief market analyst at AvaTrade.
The U.S. stocks traded sharply lower Friday, with the S&P 500 headed for its biggest January drop since 2010.
But gold prices may not have actually hit bottom yet. U.S. GDP data released Thursday “vouched that the recovery is on track (meaning less demand for risk averse derivative),” Aslam said. Gross domestic product grew at a 3.2% annual pace in the fourth quarter.
“With bonds yields declining due to an increase in the demand for the safe haven (due to emerging market crisis), we think, that the [Federal Reserve] may use their intuition and actually take this opportunity to wind down their [quantitative easing] emphatically,” said Aslam.
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In recent days, however, gold has found support as a selloff in emerging markets drove investors to gold.
But Andrey Kryuchenkov, strategist at VTB Capital in London, said that the bullion’s reaction to the emerging-market selloff seen earlier this month was “muted” compared with the risk-averse behavior in developed markets in times of stress similar to the euro-zone debt crisis or the financial crisis in 2008.
“Bullion investors pay much more heed to yields on major DM [developed market] currencies and returns on benchmark blue-chip indices. And, naturally, with bullion being noninterest bearing, expectations for higher dollar yields usually weigh on sentiment and also with major paper gold holders concentrated in DM,” Kryuchenkov said.
Gold fell nearly 2% on Thursday, taking its cue from a stronger dollar and a rebound in equities.
In other metals trading Friday, April platinum fell $9.40, or 0.7%, to $1,372.90 an ounce, with prices, based on the most-active contracts, trading around 3.9% lower for the week, down about 0.1% for the month. March palladium edged down $3.60, or 0.5%, to $703.25 an ounce, with prices losing 4.3% on week and poised for a loss of around 2.1% on the month.
