Gold Bounces Off One-Month Low To End The Week In Neutral Territory
New York (Jan 2) Gold prices have managed to bounce off one-month lows as analysts saw some short-covering and bargain hunting in the marketplace, Friday.
February Comex gold futures are holding on to some of its gains; as of 1:57 p.m. EST, February gold was trading at $1,182.40 an ounce. However, despite Friday’s positive close, gold is still ending the week in slightly negative territory.
The first trading day of 2015 has been exciting for the gold market as prices have swung within a $27 dollar range during the session. Silver prices followed gold's volatility; as of 1:57 p.m. EST, March Comex silver was trading at $15.695 an ounce.
“The turnaround in gold was an impressive way to start 2015,” said Adam Button, currency strategist at Forexlive.com.
A weaker euro in the morning, following comments from the European Central Bank President, Mario Draghi, caused the U.S. dollar to rally and gold to fall to a session low of $1167.30.
In an interview Friday with the German financial newspaper, Handelsblatt, Draghi hinted that the ECB might start buying government bonds and expand its quantitative easing measures in the new year.
“We are making technical preparations to alter the size, pace and composition of our measures in early 2015,” he is quoted as saying in the interview
March U.S. dollar index futures are trading at their highest level since December 2005, breaking above the psychological area of 91.
However, according to some analysts, disappointing manufacturing data in December forced some gold traders to cover their short-positions.
The Institute for Supply Management said that its Purchasing Managers Index fell to its lowest point in six months, hitting a level 55.5%, down from November’s reading of 58.7% and well below economist expectations of 57.5%.
Bill Baruch, senior commodity broker at iiTrader, said that after hitting a one-month low, it appears some traders were disappointed that gold couldn’t push any lower and were quick to cover their short-bets.
Not only is short-covering helping to push gold modestly higher, but he added that it is becoming an attractive currency, especially in Europe.
“Gold priced in euro hit its highest level since 2013. I think we are going to see more long-term weakness in the euro so people are looking for ways to protect their capital. Gold at these levels looks attractive,” he said.
Button agreed that gold is becoming a much more attractive investment in Europe, where there is strong demand for safe haven investments.
“Today German five-year bonds yields went negative. Why would you pay the German government to hold your money when you can just invest in gold,” he said.
Button also said that there could be some bargain hunting in the marketplace as January has historically been a strong month for gold, especially for Asian markets, which will be celebrating the Lunar New Year in February.
“Not only is there a season factor to gold but it has been strengthening as China’s economy and middle class build,” he said. “I think you ride this way through February to $1,300.”
However, some analysts are expecting to see high volatility next week as major data will be released. Not only will markets react to comments from Draghi following the ECB’s monetary policy meeting on Thursday, but on Wednesday the Federal Reserve will release the minutes of its December Federal Open Market Committee Meeting.
Finally the week comes to an end with the release of U.S. employment data. Economists expect that U.S. nonfarm payrolls show that 241,000 jobs were created in December and that the unemployment rate will fall to 5.7%.
Source:KitcoNews
