Gold reclaims $1,200, but set for weekly loss
San Francisco (Dec 20) Gold futures reclaimed the $1,200-an-ounce level on Friday as traders attempted to recover from a more than 3% drop in the prior session that sent prices to their lowest settlement in three years.
Gold for February delivery to $1,203.50 an ounce on the Comex division of the New York Mercantile Exchange. For the week, prices traded 2.6% lower.
On Thursday, gold futures lost 3.4%, or $41.40 to $1,193.60 an ounce, their lowest settlement in more than three years and the biggest single-session loss since late June, pressured by the Federal Reserve’s January tapering plans and a rally in the U.S. dollar
March silver to $19.45 an ounce in the latest dealings, after suffering a 4.4% drop on Thursday. Prices were set for a loss of 0.9% on the week.
During the year, the “‘will they or won’t they’ debate on tapering” took its toll on the price of the precious metal,” said Jeffrey Sica, president and chief investment officer of Sica Wealth Management.
Gold futures prices were down roughly 29% for the year, ready to log their first yearly loss in 13 years.
Investors were fearful of a possible taper and gold maintained a reasonable price, but once the taper fears subsided and investors started chasing the equity market, there was an “exodus from gold and it was viewed as an unnecessary investment,” said Sica. Now that tapering will begin in January, “albeit small and insignificant, the fear of a pullback in the equity market will return and investors will be looking to return to gold in 2014.”
But not everyone completely agrees.
Jeffrey Wright, managing director at H.C. Wainwright, said gold in the short term will face pressure due to a stronger U.S. dollar and “further emphasis on money flowing into broader equity markets in search of return.” That’ll increase volatility for gold, with prices having the potential to test the $1,100 support levels in coming weeks, he said.
But in the medium term, “these scenarios typically overplay themselves and gold could attract institutional and central-bank interest in an ‘overreaction’ to the taper, said Wright. For 2014, he sees gold range bound in the $1,050 to $1,250 range without some additional catalyst.
In economic news on Friday, the government revised up its estimate for U.S. third-quarter economic growth to 4.1%, topping expectations. Gross domestic product got a lift from increased consumer spending and more business investment in intellectual property such as software.
Elsewhere in metals trading, January platinum added $13.80, or 1.1%, to $1,332.20 an ounce while March palladium tacked on $4.45, or 0.6%, to $700.75 an ounce. Both metals were poised for losses of around 2% for the week. High-grade copper for March delivery added 2 cents, or 0.6%, to $3.315 a pound, little changed from a week ago.
