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Gold & metals

Closing Gold & Silver Market Report – 7/15/2011

Gold gains on euro worries as dollar rises

LONDON, July 11 (Reuters) - Gold rose for a sixth day on Monday in its longest stretch of gains since March, driven by investor concerns over the potential spread of the  euro zone  debt crisis.

The euro fell by more than 1 percent against the dollar, which hit two-week highs against a basket of currencies , as European Union officials held an emergency meeting to discuss whether the troubles that have plagued  Greece, Portugal and Ireland could spread to Italy.

That followed Friday's U.S. non-farm payrolls data, which showed job creation had virtually ground to a halt, dampening hopes that the world's largest  economy  would bounce back from its slowdown in the first half of this year and helping gold stage a 3.9 percent weekly rise in its best week since November 2009.

Spot gold rose to a 2-1/2-week high of $1,556.59 before trading at $1,554.50 an ounce, up 0.7 percent by 1407 GMT. U.S. gold August  futures  were GCcv1 up 0.9 percent at $1,555.50 an ounce.

" Given that we're in a seasonally weak period for physical demand, the downside is not as well supported as it could be. In turn given the period we're in, prices have held up really well on the back of the macro uncertainty over the European sovereign debt, as well as the dollar," said Suki Cooper, an analyst at Barclays Capital.

" So it's being pulled in two directions. Had the sovereign debt issues escalated during a seasonally strong period such as in April, there would have been a larger price pull towards the upside on the back of safe-haven buying and physical demand support."

Consumers tend to retreat from the gold market in the northern hemisphere summer months.

Gold was just over 1 percent below early May's record high at $1,575.79 an ounce, but the price of bullion hit record highs in both euros and sterling on Monday.

GOLD IN EUROS, STERLING

Euro-denominated gold hit record highs above 1,091 euros ($1,583) an ounce, while sterling-priced gold rose for a sixth day to a record 977.65 pounds ($1,571)an ounce.

" As this European crisis develops further, you would expect to see, and we are already seeing, people coming into gold on the physical side, not necessarily through ETFs but through other avenues, and you will see some defensive positioning from investors on the institutional side," Tom Kendall, analyst at Credit Suisse said.

European Council President Herman Van Rompuy called an emergency meeting on Monday at which EU finance officials would discuss a range of options for Greece's debt mountain, galvanized by the growing threat of contagion to  Italy, the euro zone's third-largest economy.

" If we start to see more pressure on Italy, such as talk of debt default, gold will look to test the previous high," said Darren Heathcote, head of trading at Investec  Australia.

Last week, holdings of gold in exchange-traded products (ETFs) rose for a fourth consecutive week, reflecting a pick-up in investor demand for the metal over the last month.

So far this year, however, gold ETF holdings have barely changed, although they have risen in three of the last four months.

Ongoing worries about euro zone nations' sovereign debt and uncertainties around the debt ceiling talks at the U.S. Congress also helped boost gold's safe-haven appeal.

On the physical market, buyers have moved to the sidelines after prices advanced nearly $60 in the previous week while scrap sales trickled in, dealers said.

Spot silver fell was flat at $36.64 an ounce but off Friday's one-month high of $36.82.

Platinum and palladium were both lower on the day. Platinum was down 0.3 percent, down for a second day, at $1,728.49 an ounce, while palladium fell 0.5 percent to $768.22. ($1 = 0.622 British Pounds) (Additional reporting by Rujun Shen in Singapore, editing by Jane Baird) 

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Gold rallies after weak U.S. payrolls data

* Much weaker than expected payrolls data lifts gold

* U.S.  economy  added just 18,000 jobs in June

* Platinum:palladium ratio at four-month low

By Jan Harvey

LONDON, July 8 (Reuters) - Gold prices rose nearly 1 percent on Friday, erasing early losses, as much weaker-than-expected U.S. non-farm payrolls data fuelled fears the recovery in the world's biggest economy was struggling to gain traction.

Spot gold rose to a fresh two-week high of $1,545.30 an ounce and was bid at $1,543.49 an ounce at 1318 GMT against $1,531.85 late in New York on Thursday. U.S. gold  futures  GCv1 for August delivery fell $12.70 to $1,543.30.

Employers in June added the smallest number of new jobs in nine months, dashing hopes economic recovery was picking up. Non-farm payrolls rose by only 18,000, the Labor Department said, well below economists' expectations for a 90,000 rise.

" It is the public sector employment which was the disappointing factor," said Peter Fertig, a metals consultant at Quantitative Commodity Research. " The market overreacted after yesterday's ADP report showed a strong increase in the private sector payrolls."

" We also have in the  euro zone  a draft document from the EU which spooked bond investors this morning," he added. " You have some safe haven flows (into gold)."

According to a European Union draft document seen by Reuters, European countries will support banks that fail stress tests if those lenders cannot raise capital from investors within six months.

Worries over the financial health of some euro zone economies, chiefly  Greece  and Portugal, and over an upcoming discussion of extending the U.S. debt ceiling have tempered risk appetite across financial markets this week, lifting gold.

" A lot of European investors would still like more diversity than just holding euros," said Mitsui & Co Precious Metals analyst David Jollie. " That can be a risk-aversion thing rather than a view that gold will appreciate in price."

The cost of insuring Greek and Portuguese government debt against default rose on Friday due to ongoing uncertainty over a second bailout package for Greece.

EURO DECLINES

The euro fell sharply on the weak U.S. jobs report, though it later trimmed losses. A consequently stronger dollar would usually weigh on gold, but the impact of  currency  moves is currently being outweighed.

Among other precious metals, silver hit a four-week high at $36.81 an ounce and was later bid at $36.71 an ounce against $36.41.

Spot platinum was bid at $1,741 an ounce versus $1,739.85, while spot palladium was at $773.22 an ounce against $781.55.

The platinum:palladium ratio -- the number of ounces of palladium needed to buy an ounce of platinum -- held at its lowest in more than four months at 2.23 on Friday.

Palladium became increasingly expensive compared with platinum earlier this year, with its ratio falling to 2.16 in February, an eight-year low. But it failed to sustain those gains as jitters over the health of the car industry dented buying interest in the metal, moving back to 2.5.

" From the lows in May, palladium rallied 17 percent while platinum climbed 6 percent, and during the pullback platinum dropped 10 percent, compared to palladium's 11 percent drop," said ScotiaMocatta in a monthly report.

" Both metals have, however, found good underlying buying interest and have formed V-shaped rebounds off the lows." " After significant price gains in both PGMs in anticipation of economic recovery, prices are now consolidating," it added. " Considering the extent of the gains and the fact recovery has slowed, prices could well correct further on the downside until demand recovers. Expect dips to be well supported." (Reporting by Jan Harvey Editing by Jane Baird)

 

 

 


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Gold steadies near $1,530/oz after ECB rate rise

Gold hits two-week high on inflation, debt concerns

* Inflation comes back into spotlight after  China  lifts rates

* Dollar hits session highs versus  currency  basket

* Debt woes support gold after Moody's cuts  Portugal  rating

By Jan Harvey

LONDON, July 6 (Reuters) - Gold prices hit a two-week high on Wednesday, extending the previous session's 1.3 percent rise, as a rate hike from China put inflation concerns back in the spotlight, and as worries over  euro zone  and U.S. debt lifted the metal's haven appeal.

Spot gold was bid at $1,526.81 an ounce at 1343 GMT, against $1,515.70 late in New York on Tuesday, having fallen as high as $1,509.49. U.S. gold  futures  GCv1 for August delivery rose $15.10 at $1,527.80 an ounce.

China's central bank increased interest rates for the third time this year, by 25 basis points, making clear that taming inflation is a top priority even when as the  economy  slows gently.

" China has done a number of reserve requirement increases over the last several months -- however, you have climbing inflation, so in real terms you are not making any money by just holding cash," said VM Group analyst Carl Firman.

" A lot of new middle-class Chinese have cottoned on to this, and there is a lot of demand for gold as a store of wealth under these circumstances. Their money is not earning anything, in fact you are getting negative returns now holding cash, whereas you are not getting that holding gold."

" I think China would need to raise rates higher and higher still until we start to see some kind of tapering off of their inflation figures," he said.

The euro extended losses after China raised rates, pushing the dollar index to session highs. Usually this would weigh on gold, but the assets are currently moving in line.

" The stronger dollar could stall a prospective rally if there is a flight to safety... but then you will witness again what happened in 2009, when the correlation between the dollar and gold was positive," said Firman. " That could very well manifest itself over the next couple of months."

The metal is also taking support from concerns over euro zone debt after Moody's cut Portugal's credit rating to junk status, and an upcoming debate on raising the U.S. debt ceiling.

" The issues surrounding the euro zone are going to last for quite some time, so they are something that  markets  are going to have to be dealing with on an ongoing basis," said Macquarie analyst Hayden Atkins.

Bonds issued by the euro zone's weaker countries came under intense pressure on Wednesday after the Moody's cut, which raised fears Portugal would also eventually be pushed into a debt restructuring.

ECB MEETING AWAITED

Traders are closely watching the ECB's policy meeting on Thursday. The bank is set to lift euro zone interest rates to 1.5 percent and to show no sign of softening its stance that  Greece  must not default on its debts.

Expectations that the ECB will hike rates more quickly than the Federal Reserve have helped lift the euro more than 7 percent against the dollar so far this year, supporting gold.

From a technical perspective, the precious metal is facing tough resistance after its latest break higher.

" We see resistance at $1,518 and $1,528 which represent the 50 percent and 61.8 percent of our June drop from $1,558 to $1,479," said ScotiaMocatta in a note.

" We believe the market will maintain its bearish slant while the metal holds below $1,518 but will shift neutral on a close back above that level."

On the supply side of the market, investors were awaiting fresh developments in a strike in Freeport-McMoran's  Indonesia  mine as well as the threat of a strike in South Africa's main gold mines.

Silver was bid at $35.87 an ounce against $35.45, spot platinum was bid at $1,734.24 an ounce versus $1,737.05, and spot palladium at $773.47 an ounce against $770.38. (Reporting by Jan Harvey) 

Factors To Watch on July 6