Gold rally sets stage for Best Close in More Than a Week
Futures prices for gold rallied for a second straight session on Thursday, putting them in position to close at their highest level in more than a week as traders continued to cheer the return of gold buyers from China and looked ahead to the European Central Bank’s quantitative easing measures.
The gains for gold come despite strength in the U.S. dollar DXY, +0.99% which tends to dull demand for the dollar-denominated yellow metal.
Gold for April delivery GCJ5, +0.70% rose $6.60,or 0.6%, to $1,208.10 an ounce on Comex. May silver SIK5, +0.80% which is now the most-active contract, tacked on 26 cents, or 1.6%, to $16.735 an ounce.
Gold has seen stronger demand from China following the Lunar New Year holiday as stock markets in mainland China reopened on Wednesday, analysts have said.
“What is most interesting about today’s rally is that it comes on a day when [the U.S. dollar] is also climbing relative to other majors,” said Colin Cieszynski, chief market strategist at CMC Markets.” This suggests that gold’s action is more related to developments overseas.”
With the European Central Bank poised to launch its new quantitative-easing program as soon as next week, “gold appears to be climbing on speculation that the ECB may finally be getting serious about growing its balance sheet again,” he said in a note Thursday.
On Wednesday, gold futures scored their first gain in four sessions thanks to comments from Federal Reserve Chairwoman Janet Yellen, a weaker U.S. dollar and signs of rising demand from China.
During her second day of testimony Wednesday, Yellen continued to stress that normalization of interest rates would begin when the committee is confident inflation is on track to reach the Fed’s target. See the blog on Wednesday’s testimony.
Economic data in the U.S. were mixed. Weekly jobless claims rose more than expected and January consumer prices tumbled, while the rise in durable-goods orders came in higher than was forecast.
Looking ahead, James Chen, chief technical strategist at City Index, remains a short-term gold bug.
“Having fallen to a seven-week low earlier in the week, gold has rebounded slightly back above the $1,200 level,” he said. “With major downside support residing around the $1,180 level, the current price area could serve as a tentative bottoming stage for the precious metal.”
He warned, however, that if it weakens below that number, a retest of the $1,130-an-ounce level could happen rather quickly. Chen noted that $1,240 could provide some resistance.
Other metals were on the move higher, as well. April platinum PLJ5, +0.74% rose $10.60, or 0.9%, to $1,149.40 an ounce, while June palladium PAM5, +0.19% the most-active contract, gained $2.85, or 0.4%, to $812.55 an ounce. May copper HGK5, +1.68% added 3.7 cents, or 1.4%, to $2.68 a pound.
Source: MarketWatch
