FX: Gold Remains Resilient Despite Sell-Off in Commodities
Growing negative sentiment is causing investors to move out of commodity markets, which is also helping to drag down gold prices.Gold prices are modestly weaker Monday afternoon, trading in the mid-$951 per ounce level. There was an increase in volatility early in the North American session. Prices dropped to session lows of $908.60 just ahead of the open.
Following the open, prices spiked higher to $932.50. However, the gains were short lived as risk aversion sentiment dragged prices into negative territory.
According to some commodity strategists, grim news from the U.S. auto sector is helping to weaken all commodity prices, including those for gold.
The Obama administration's autos task force rejected the restructuring plans from GM and Chrysler. Chrysler has 30 days to close a deal with Fiat or could be forced into bankruptcy. Meanwhile, GM now has 60 days to restructure its plans. GM CEO Rick Wagoner stepped down at the request of the White House.
Despite Monday's broad sell-off, Aaron Fennell, commodity futures broker at MF Global Canada, said gold prices are holding up reasonably well. He pointed out that oil prices are down over 7% on the day, while gold prices are down 0.4%.
"The news creates some risk that the recession could be worse than expected," Fennell said. "Gold is a resilient commodity and we are seeing that today. We have seen the dramatic moves in the last few days."
Mike Glaser, futures broker at LaSalle Futures, said he is expecting gold to continue to bounce around a broader range of between $900 and $960.
"We are trading below the 50-day moving average [on Monday] and I think overall we will see some short-term weakness but, in the long term, prices will trend higher," he said. "I am still looking at buying on dips."
In the mining sector, spot gold is trading down $2.01 to $921.15 USD. In Canadian dollars, gold is up $17.62 to C$1163.65. Silver contracts at the CBOT are down $0.24 to $13.02.
Bloomberg's index for base metals is down 2.95 points to 119.46. Wheat futures at the CBOT are up $5.25 to $512.50.
WTI Crude oil is down $3.86 to $48.52, while ICE crude oil is trading down $3.94 to $48.04.
Meanwhile, ICE RBOB gasoline futures are down $8.46 to $140.33 and Globex natural gas is down $0.01 to $1.32. Heating oil at the ICE is down $4.85 to $143.28.
