Gold bounces to seven-session high, rest follow
LONDON (August 12) Gold bounced to a seven-session high at the start of the week on follow-through buying after physical demand kept prices from dropping below support in recent trading.
The rest of the complex also soared, with silver at an eight-week high, platinum a two-month high and palladium a 12-session high.
Spot gold was last at $1,326.55/1,327.35 per ounce, up $12.55 or nearly one percent on Friday's close and having peaked at $1,333.80. The metal again opened the week with an up-gap, which can be a bullish signal - it is also the second time it has done so in four weeks.
"Gold’s negative correlation with the dollar has strengthened and is indeed stronger than its correlations with the S&P 500 and 10-year US Treasuries, and the recent weakness in the dollar has helped to stem gold’s downtrend," Suki Cooper at Barclays said.
On Thursday, the dollar fell to a near-two-month low against the euro but it has since recovered somewhat to 1.3305, a third of a cent firmer, ahead of closely watched US retail sales data due for release tomorrow that may provide some clarity of when the Federal Reserve might begin to taper its quantitative easing programme.
The general consensus is for the Fed to start to unwind its stimulus efforts - it is committed to purchasing $85 billion in new debt per month - from its next meeting in September, which would probably be bearish for gold
Accommodative measures from the US central bank are supportive of gold because extra liquidity tends to debase the dollar and create future inflationary risks.
"Gold continues to take its cue from US macro data, yet the physical market is setting a weaker footing for prices. In our view, physical demand will need to step up again, even in light of scrap supply declining, given the continued ETP outflows and the sizeable short covering activity that has already taken place," Cooper added.
In wider markets, equities are generally lower, with the Nikkei dropping 0.7 percent to 13,519, while in Europe, the FTSE 100 is down a quarter of a percent at 6,567 and the German Dax down 0.6 percent at 8,285.
Today's data calendar is relatively light, with Japan's second-quarter preliminary GDP coming in at 0.6 percent, below the forecast 0.9 percent. Later, the US July Federal budget balance is expected to come in at a deficit of $95.3 billion.
In the rest of the metals, silver is the star performer, gaining 2.2 percent or 46 cents to $20.97/21.02 per ounce, having traded at a high of $21.30.
Palladium had been as high as $748 but was last quoted at $740/745 per ounce, still up $1, while platinum, which had jumped to $1,510 earlier, was last $6 lower at $1,493/1,503.
