Analyst sees price pullback as “constructive longer term”
By Myra P. Saefong, MarketWatch
TOKYO (MarketWatch) — Gold futures dropped as much as $21 per ounce on Friday, pulling back as the U.S. dollar regained lost ground against foreign currencies, dulling the investment allure of the precious metal, which hit a record high earlier this week.
Gold for December delivery (GCZ10 1,386, -17.40, -1.24%) traded as low as $1,382.20 an ounce in electronic trading on Globex. It recouped some of those losses to trade recently at $1,384, down $19.30.
The contract gained $4 in New York Thursday. See Thursday's metals column.
“I would call this pullback some froth being taken off the market,” said Julian Phillips, editor at GoldForecaster.com. “I do believe that a large number of short position holders were badly squeezed in the run up too, [so] this current temporary pullback will be a consolidation period.”
Losses in gold prices Friday came as the U.S. dollar index (DXY 78.22, +0.00, +0.00%) , which measures the greenback against a basket of six major currencies, rose to 78.470 from 78.164 late Thursday in North American trading.
“While most surprises should continue to be to the upside, a pause [in gold] that refreshes for a few days or even a few weeks is much preferred by yours truly, versus a return to a parabolic-like climb,” Peter Grandich, editor of The Grandich Letter, said in commentary posted on his Web site late Thursday in New Jersey.
“A pullback to $1,360–$1,380 or even a test of the 50-day moving average would all be constructive longer term,” he said.
GoldForecaster.com’s Phillips pointed out that “retail demand from India was pretty good this year, but that is complete, so the market is back to where it was before.”
Also, the Group of 20 nations summit “is an influence and a disappointing one,” he said. “The head of the World Bank has raised the subject of gold as a reference point for currencies and values. This has opened the way for a greater role for gold in the monetary system. This will underpin gold in the $1,380 area.”
