Markets

P.M. Kitco Metals Roundup: Dollar, Commodity Strength, Follow-Through Boost Comex Gold Modestly

Gold futures ticked modestly higher Wednesday with the help of a softer dollar, benefitting with other commodities from improved global economic data, as well as follow-through technical buying from Tuesday's strong move. Silver also rose as speculative buying continued.

Shortly after the pit closes, February gold was $2.40, or 0.2%, higher at $1,388.50 per ounce on the Comex division of the New York Mercantile Exchange. March silver gained 13.8 cents, or 0.5%, to $28.35.

"We have a weaker dollar, and that certainly helps," said Bill O'Neill, one of the principals with LOGIC Advisors. Investors often turn to gold as a hedge against dollar weakness, plus a soft greenback makes all commodities cheaper in other currencies and thus can help demand.

Meanwhile, O'Neill said, stronger economic data around the globe helped equities generally. This included purchasing managers indexes in China, the U.K. Germany and France. Private-sector payrolls in the U.S. registered their biggest rise in three years, according to a report from Automatic Data Processing.

"There is a pretty buoyant tone in commodities in general," spilling over into gold, O'Neill said. "It also raises the specter, if we continue to see these growth patterns, of inflation lurking in the background…And in general, we're continuing to see demand for gold as the ultimate currency alternative."

The metal ran into profit-taking pressure during overnight Asian hours, before benefitting from dealer buying during the European day, he added.

After the favorable global economic data, metals with industrial uses fared strongest, O'Neill pointed out. Whereas February gold was up 0.2%, March copper was up 11.45 cents, or 3%, to $3.94 a pound. January platinum climbed $15.60, or 0.9%, to $1,682 an ounce.

Meanwhile, an age-old adage in the gold market is that increased liquidity tends to lead to strength in the metal. Thus, gold benefitted after a Reuters report saying that the U.S. is prepared to support the extension of the European financial stability fund via an increased commitment of cash from the International Monetary Fund, said a New York trader.

Also, gold is retaining its upward momentum after "a bit of technical breakout" as the market moved above the $1,370 region on Tuesday, the trader said. He cited a general willingness among investors to want to hold hard assets generally, with base metals and crude oil also higher lately.

"I think it was more interesting yesterday when the dollar was up and gold was up," he said. "Now, the dollar is down and gold is up still. There is some oomph under there."

Worries about European sovereign-debt-the main catalyst behind Tuesday's rise in gold--remain, said Craig Ross, vice president of ApexFutures.com. A key for the market in the near term will be Thursday's meeting of the European Central Bank, with traders watching to see whether officials make any announcements on how to deal with the crisis, he said.

"There is more rolling out of currencies and into commodities, and in particular gold," Ross said. "We think we have a really good chance of breaking the old highs in gold in the next couple of weeks."

A trader said his longer-term view is for the decade-long bull market to continue.

"You have a lot of questions about almost all currencies, not just the euro but the dollar as well," he said. In many instances, central banks may feel they hold too many dollars and euros, he said. "There are probably central banks in there making (gold) purchases."

Ross put some resistance for February gold around $1,400, but with the key level at $1,426.10. "Obviously, $1,400 is a psychological number everyone likes to throw around, although we don't think it will have much trouble blowing through that," Ross said. "There might be some buy stops above that to help propel it a little bit farther."

He put the main support down in the area from $1,328 to $1,320.

Meanwhile, silver outperformed gold, O'Neill said. As a thinner market, silver tends to have more volatility and outperforms gold on upswings, and likewise tends to fall more on pullbacks.

"It is attracting huge speculative demand," O'Neill said. "We're seeing the speculative side really pouring into silver, with record silver-coin sales here in the U.S."

Ross put the main resistance for March silver around $29.405. He put support in the mid $26 area, then around $25.

By Allen Sykora of Kitco News; asykora@kitco.com

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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