Syd 08:17 GMT January 1, 2010
Gold stays positive as greenback pares early losses
YEAR-END position squaring enabled gold futures to hold onto some of their gains yesterday even as the dollar recovered most of its early weakness.
Lightly traded but nearby January gold rose $US3.70 to $US1095.20 an ounce on the Comex division of the New York Mercantile Exchange, while most-active February climbed $US3.70 to $US1096.20.
Most-active March silver rose US4.3 cents to $US16.845.
Gold opened the session higher with the ICE Futures US March dollar index on the defensive, hurt in part by a survey showing a rise in UK house prices last month. Investors often buy the metal as a hedge against US dollar weakness.
The precious metal gave back some of its gains when the US dollar index pared its loss, but the metal managed to stay in positive territory. The greenback recovered when a larger than forecast fall in initial jobless claims led to speculation the Federal Reserve might hike interest rates faster than previously thought, currency analysts said.
Start of sidebar. Skip to end of sidebar.
End of sidebar. Return to start of sidebar.
Leonard Kaplan, president of Prospector Asset Management, characterised the gold market as "enormously thin" and cautioned against reading much into the price action. Trading desks generally were lightly staffed as many participants took vacation during the short week between Christmas and New Year's Day.
"To be up $US4 or $US5 is no big deal," Mr Kaplan said. "I would attribute it to short covering at the end of the year." This is where traders, who previously sold the metal during a recent price retreat, were buying in order to offset their positions and capture any profits they might have had.
This buying was a reversal of the position-squaring that had been occurring earlier in the week, others noted. For much of the last few days, traders who previously bought were exiting positions, resulting in some selling pressure.
As of the settlement, spot-month gold was up 24 per cent for the year, the ninth straight day in which gold posted a gain. The metal was supported during 2009 by erosion in the US dollar, which leads to buying of gold as a hedge, from spring into late November. Traders also bought gold for safety due to financial uncertainty much of the year and in anticipation that loose fiscal and monetary policy will lead to inflation down the road.
Meanwhile, April platinum rose $US7.70 to $US1471 an ounce, while March palladium gained $US12.75 to $US408.85 an ounce.
These metals followed gold higher, but palladium continued to get an extra boost on investment buying from participants who look for the auto industry to increase output in 2010, said one trader. Palladium is used for catalytic converters.
"Expectations for physical demand are starting to drive that price a little higher," he said. "My question is at what point do some of these longs in palladium, who have been in since around $S200, start to take some profits?"
To do so, these accounts would have to sell to exit long positions in which they previously bought, which could stall the upward momentum.