MW: Gold futures tap a nearly two-week low on Globex
By Myra P. Saefong, MarketWatch
TOKYO (MarketWatch) — Gold futures touched their lowest intraday level in almost two weeks Tuesday afternoon in Tokyo, finding some support from recent strength in the U.S. dollar even as investors continue to fret over European debt concerns.
Gold for December delivery (GCZ10 1,360, -8.90, -0.65%) was down $5.50 at $1,363 an ounce in electronic trading on Globex after trading as low as $1,355.20, the contract’s weakest intraday level since Nov. 3, according to FactSet Research.
Gold futures have been particularly volatile in recent trading sessions, gaining $3 on Monday after sinking almost $38 on Friday. See Monday’s metals column.
”It seems that the gold price corrected in USD terms, based on recent strength in the USD,” said Martin Hennecke, associate director at Tyche Group.
“Ironically, the strength in the USD is caused by the worsening European debt crisis (e.g. imminent Ireland bailout), which should be rather good for gold,” he said.
Gold prices had slumped Friday on concerns that China will soon take steps to rein in its inflation and move to raise interest rates. See Friday’s metals stocks.
But Julian Phillips, editor of GoldForecaster.com said he does not believe that the market fell on fears of a Chinese rate hike.
“The future investment climate has cooled now,” he said. Gold’s recent decline describes investor attitudes more than market potential, he said.
China factor
From here, “the market will consolidate going forward until a global economic factor drives it one way or the other,” said Phillips.
Overall, however, Hennecke said fundamentals for gold remain compelling “as both the U.S. and Europe will have no choice but to continue [quantitative easing] and bailout policies or face national bankruptcy.”
“Moreover, continued strong demand from China and rising mining costs keep supporting the price,” he said, noting that the Chinese economy is expected to overtake the U.S. in terms of output in two years’ time, according to a report by the Conference Board.
“This is relevant for gold in terms of rising Chinese consumption/buying power versus the U.S., given that the Chinese are more likely gold buyers than Americans, as their purchasing power increases,” Hennecke said.
