Gold solidly above $1,300, set for 4% gain on week
San Francisco (Feb 14) Gold futures traded solidly above $1,300 on Friday, poised for a gain of roughly 4% for the week as prices extended their rally to an eighth session in a row, fueled by a combination of increased physical demand and economic jitters.
Demand for physical gold from inflows into the world’s largest gold-backed exchange-traded fund rose this week, with holdings about 1.2% higher as of Thursday from last Friday’s level.
April gold futures added $17.20, or 1.3%, to $1,317.30 an ounce on the Comex division of the New York Mercantile Exchange.
March silver climbed 88 cents, or 4.3%, to $21.27 an ounce, with prices up about 6.7% for the week.
Gold prices are “above the psychological level of $1,300, which is a bullish sign for gold,” said Naeem Aslam, chief market analyst at AvaTrade. “Physical gold is attractive at this price level for many.”
The most-active gold contract was on track for a 4.3% gain on the week. Year to date, it is up roughly 9.6%.
Gold had seen an initial boost from safe-haven demand amid a sharp rise in risk aversion as emerging markets intensified in January, said Mitul Kotecha, global head of FX strategy at Credit Agricole, noting that a drop in U.S. bond yields aided the metal’s path higher.
So gold prices “breezed above their 100-day moving average around $1,266.61 to trade around the 200-day moving average level around $1,303.70,” he said. A close above that level would be important to “sustain any short-term uptrend.”
Julian Jessop, economist at Capital Economics in London, said his firm expects further gains for gold over the course of 2014, “helped by strong demand from China and an eventual easing of the import ban in India.”
Gold’s support from softer U.S. economic data, however, could fade as the recovery gathers pace and the Federal Reserve continues to pare back its bond-buying program, Jessop said. The Fed’s aggressive quantitative easing strategy had helped fuel a historic gold rally on worries the measures would undercut the dollar. Gold slumped hard last year as the Fed moved toward tapering its bond-buying program.
On Friday, gold added to its earlier gains immediately after news that U.S. consumer sentiment was unchanged in February.
Gold still has strong underlying support around $1,200 an ounce, Jessop said, which is where the price stabilized in mid-2013 and toward the end of last year. On a more fundamental basis, it is the level at which a significant number of gold mines become unprofitable, he said, reiterating the firm’s forecast for a gold price of $1,450 by the end of 2014.
(Source: MarketWatch)
