MW:Gold buoyed as risk appetite revives, dollar slips
By William L. Watts, MarketWatch
FRANKFURT (MarketWatch)—Gold futures edged higher Friday, finding modest support as overall risk appetite revived, pushing up equities and commodities as the dollar lost some ground.
Gold futures for December delivery GCZ2 +0.33% rose $3.70, or 0.2%, to $1,773.90 an ounce.
Gold remains underpinned in part by expectations that renewed rounds of monetary stimulus by the Federal Reserve will continue to boost gold as investors fear the impact of quantitative easing on the U.S. dollar. But some strategists warned that the relationship may not be so straightforward.
”There is evidence that gold prices have been supported by increasing money supply; and with the Fed announcing another round of asset purchases, this could see further upside in gold prices,” wrote Adrian Schmidt and Jennifer Hau, forex strategists at Lloyds Bank in London.
“However, it is uncertain how long this relationship can persist. While there has been a sharp rise in M0 [a narrow measure of money supply], broad money growth has been comparatively subdued, and until the impact of QE feeds into the broader money supply inflationary pressures are unclear,” they said, in a note to clients.
The dollar was under slight pressure Friday. The dollar index DXY -0.30% , a measure of the U.S. unit against a basket of six major rivals, fell slightly to 79.392 from 79.428 in North American trade late Thursday. A weaker dollar can be supportive for commodities priced in the currency.
Meanwhile, the Financial Times reported that Spain and the European Union are in the process of drafting a new economic reform plan that could clear the way for Madrid to request a full bailout that would be accompanied by the activation of the European Central Bank’s plan for potentially unlimited bond purchases. See: Spain bailout to be unveiled next week: FT .
Speculation Spain could seek help was credited with lifting European equities, while U.S. stock index futures also pointed higher.
Gold futures ended slightly lower on Thursday as the dollar rebounded and U.S. equities declined.
Among other metals, December silver SIZ2 +0.48% rose 0.4% to $34.82 an ounce. High-grade copper futures HGU2 +1.29% rose 5 cents, or 1.3%, to $3.82 a pound.
October platinum futures PLV2 +0.76% rose $11.60 to $1,635.50 an ounce. Palladium for December delivery rose $6.95 to $668.05 an ounce.
William L. Watts is MarketWatch's European bureau chief, based in Frankfurt.
