Gold Rout Continues, Though Some Still Bullish

Gold extended its downhill slide in electronic trading Friday, a day after the precious metal took a more than 2% beating on concerns about the U.S. monetary-policy outlook.

Gold for December delivery GCZ3 -0.83%  fell $13.90, or 1%, to $1,317.30 an ounce in Globex trade, after closing out Thursday’s Comex trade with a loss of 2.4%, or more than $33 an ounce.

December silver SIZ3 -0.92%  — which had tumbled 4.4% in New York — furthered its decline by 23 cents, for a 1% drop to $21.92 an ounce.

Analysts said stronger-than-expected U.S. jobless-claims data out early Thursday had increased the odds the Federal Reserve would begin trimming its monetary stimulus at next week’s meeting, an action that would be considered bearish for gold.

They also cited reduced expectations for a U.S. strike on Syria as dampening safe-haven demand, as well as technical factors.

“The bottom fell out after silver completed a descending triangle, and gold broke a trend support line,” wrote CMC Markets senior analyst Colin Cieszynski.

“Outflows from defensive havens appears to be the main culprit … While this may be partly due to the unwinding of Syria trades, that can’t be the only reason, as energy commodities rebounded,” he said of Thursday’s heavy selling in gold and silver, even as oil prices rose.

The further losses on Friday got help from rising U.S. dollar, with the ICE dollar index DXY -0.06% , jumping to 81.716, up from 81.513 late Thursday in North America.

A stronger U.S. unit makes dollar-denominated commodities such as gold more expensive for holders of other currencies, often hurting demand.

Yet in the face of gold’s recent weakness, some market analysts saw upside ahead. HSBC, for instance, hiked its 2013 average gold-price forecast on Thursday, according to research reported by Kitco.

HSBC said it saw this year’s average price at $1,446 an ounce, up $50 from its previous forecast, though it left its 2014 projection at $1,435.

The bank cited physical buying of the metal for the forecast hike, with investment demand fading as fears of imminent inflation diminish.

“With investment demand no longer determining gold prices, we believe the price is now being driven by physical demand for jewelry, coins, and bars from China, in particular. Indeed, we would argue that physical demand trends will be key to gold prices in 2013 and 2014,” Kitco quoted the HSBC analysts as saying.

Earlier this week, DoubleLine Capital’s Chief Executive Jeff Gundlach offered a guarded endorsement of gold, now that it had “lost its safe-haven status.”

“It was kind of over-believed. Now, I kind of like gold. It’s definitely very non-correlated to other assets you may have in your portfolio, and it does seem sort of cheap,” Gundlach said.

In other metals-futures trading Friday, December copper HGZ3 -0.14%  held steady at $3.21 a pound, while October platinum PLV3 +0.02%  fell $3.90, or 0.3%, to $1,438.80 an ounce.

December palladium PAZ3 +0.97%  fell 65 cents to $692.15 an ounce.

Source: MarketWatch