Gold futures retreat from five-week highs
San Francisco (Jan 21) Gold backed away from five-week high territory on Tuesday, poised to give back the gains it scored at the end of last week as a stronger dollar and downbeat price forecasts for the year encouraged sellers.
Platinum prices also pulled back in the wake of a recent run inspired by potential strikes in South Africa.
Gold for February delivery /quotes/zigman/9159480/realtime GCG4 +0.14% fell $12.40, or 1%, to $1,239.50 an ounce on the Comex division of the New York Mercantile Exchange. Trading floors were closed on Monday in observance of the Martin Luther King Jr. holiday. Gold reversed gains seen in electronic trading overnight.
March silver /quotes/zigman/9576868/realtime SIH4 -0.94% , led the percentage declines among the metals, shedding 46 cents, or 2.3%, to $19.845 an ounce.
The decline for gold appears to be mostly to be related to the strength in the dollar, said Richard Gotterer, managing director at Wescott Financial Advisory Group.
The dollar index /quotes/zigman/1652083/realtime DXY -0.04% last traded at 81.170, below the 81.245 seen late Friday. But the index had climbed to as high as 81.388, a four-month high, earlier after comments from The Wall Street Journal’s Federal Reserve watcher Jon Hilsenrath said more tapering could be coming as soon as next week.
“Since the start of the year, gold has basked in the glory of bouncing off of the year-end tax-related selloff,” said Gotterer. “Now however, investors are beginning to focus on what Ben Bernanke’s comments and actions are going to be when he presides over his last FOMC meeting next week.”
“With stronger economic data and decent earnings, the speculation is that Chairman Bernanke will continue with what he started late last year and move for another round of tapering as he hands the baton to Janet Yellen,” he said.
Gold futures had ended last week with a bang, settling to their highest level in more than five weeks — $1,251.90 an ounce — as a move lower for most U.S. equities and a decline in consumer sentiment shined a positive light on the precious metals’ investment appeal.
But taking on a big-picture view on gold, Gijsbert Groenewegen, co-founder at Gold Arrow Capital Management, said he can’t see how the U.S. dollar can strengthen much because of its debt load and continuing quantitative easing, “even if we taper, reducing the liquidity in the markets.”
“When we taper, interest rates go up and they will break out of the 32-year downtrend in 10-year Treasury yields /quotes/zigman/4868283/delayed 10_YEAR +0.18% which will implode the bond market,” he said, adding that the higher interest rates will also implode the equity and housing markets.
That’s likely to attract money to gold and silver “because they are the true reflection of the fundamentals of the reserve currency and world economy,” said Groenewegen.
LBMA: analysts see 14% gold price drop
But analysts’ forecasts for gold prices this year have been relatively downbeat.
The London Bullion Market Association reported that its overview of analysts’ forecasts show that gold and silver are expected to remain broadly flat during 2014.
On average, analysts forecast average gold prices to be $1,219 an ounce in 2014, trading in an average range of $1,067 to $1,379 during the year.
