Gold Heads for Weekly Gain on Speculation Dollar Rally to Stall

Business Week

Gold, little changed in New York, headed for a second straight weekly gain on speculation that the dollar’s rally will stall, boosting the appeal of the precious metal as an alternative investment.

The dollar rose as much as 0.6 percent against the euro before paring gains. The Federal Reserve yesterday raised the discount rate it charges banks for direct loans for the first time in more than three years, a signal that the U.S. economy is recovering from the longest recession since World War II.

“Gold looks strong,” said Matt Zeman, a metals trader at LaSalle Futures Group in Chicago. “People are realizing this isn’t a tightening. Raising the discount rate isn’t going to have an effect on the American household. It all goes back to the credibility of fiat currencies. People will continue to buy gold on dips.”

Gold futures for April delivery slipped $1.30, or 0.1 percent, to $1,117.40 an ounce at 11:51 a.m. on the New York Mercantile Exchange’s Comex unit. A close at that price would leave the metal up 2.5 percent this week.

Gold Prices Near One-Month High

The Wall Street Journal

Gold futures closed higher Monday on a continuation of start-of-year investment buying, a soft U.S. dollar and strong import data from China that generally reflected well on commodity demand and cash for gold prices.

Gold for January delivery rose $12.50, or 1.1%, to $,1150.70 a troy ounce on the the New York Mercantile Exchange, while February gold climbed $12.50 to $1,151.40 an ounce.

"There are two major reasons and they are related, with one causing the other," said Craig Ross, vice president of ApexFutures.com.

Gold hit its peak overnight after a report showed that Chinese exports climbed nearly 18%, while imports were up 56%.

The imports showed that the country remains on a "commodities shopping spree," helping improve risk appetite, said Jon Nadler, senior analyst with Kitco Metals.

Furthermore, the Chinese data helped send the dollar sharply lower, Mr. Ross said. Investors often trade cash for gold jewelry as a hedge against dollar weakness, plus a weaker greenback makes all dollar-denominated commodities cheaper in other currencies and thus can help demand.

Carlos Sanchez, associate director of research with CPM Group, said that gold continues to find strong investor interest at the state of the new year amid ongoing concerns about economic conditions and financial-market concerns. This especially is the case, since gold is down from the record highs hit in early December, prompting some to use the pullback as a buying opportunity, he said. The metal fell during much of December largely on selling to square positions ahead of year-end.

Also, demand for physical gold in India has reportedly picked up due to both the pullback in the dollar-denominated price of gold over the last month and an appreciation of the Indian rupee, both of which make gold more affordable for Indians, Mr. Sanchez said.

The strong Chinese import figures were especially supportive for precious metals with more industrial applications, including silver, platinum and palladium, as well as cash for gold coins, Mr. Sanchez said.

Comex silver for January delivery added 22.50 cents per ounce, or 1.22%, to $18.683.

April platinum rose $21.90 to $1,592.50 an ounce, while March palladium gained $6.80 to $431.95.

"Platinum and palladium have been getting an extra boost from the ETFs launched in the U.S. market," Mr. Sanchez said.

ETFS Physical Platinum Shares and ETFS Physical Palladium Shares began trading Friday on the New York Stock Exchange Arca platform and were the first exchange-traded funds for the platinum group metals in the U.S.