MW: Gold extends gains as Germany rejects Greece request
NEW YORK (MarketWatch) — Gold rebounded to trade back above $1,200 an ounce Thursday, buoyed by signs the Federal Reserve is in no hurry to hike interest rates and Germany’s rejection of Greece’s loan-extension request.
Gold for April delivery GCJ5, +1.57% surged $19.30, or 1.6%, to $1,219.50 an ounce. The metal traded as high as $1,222.90 after Germany said Greece’s request for a six-month extension of its loan agreement wasn’t a “substantial proposal” to resolve the Greek government’s debt standoff with its eurozone partners.
But it was the minutes of the Federal Reserve’s latest policy meeting that set the tone, analysts said.
“The publication of the minutes of the latest meeting of the U.S. Federal Reserve was responsible for the rally, as they revealed that many FOMC members are inclined to maintain zero interest rates for a longer period of time,” said analysts at Commerzbank in a note.
Gold took one on the chin Wednesday, dropping $8.40 to the lowest settlement since Jan. 2, based on most-active contracts, as the Lunar New Year holiday in China kept buyers away and the market got jittery ahead of the Federal Open Market Committee minutes.
Gold is on the “cusp of a bull market,” with plenty of support at $1,200 an ounce, Bank of America Merrill Lynch said in a note that came out ahead of the release of the minutes.
“While the U.S. central bank remains intent to raise the policy rate, we see a risk that low inflation and slowing job/activity growth could lead to a ‘later move’ than September. In turn, this would be a trigger for a meaningful gold-price appreciation, a point we have made in several recent notes,” said a team of strategists led by Michael Widmer.
Widmer said $1,200 an ounce should maintain support, as long as investors don’t reduce holdings further. He said that speculative selling has subsided to a trickle.
On the bearish side, Yves Lamoureux, president of Lamoureux & Co., a market advisory firm focused on behavioral economics, said Wednesday that gold is “still deflating from a bubble” last seen at the top of the $1,900 level. Due to that, he’s bearish short term and “very bullish” long term, he said.
In step with a gold rebound, March silver SIH5, +2.37% jumped 43 cents, or 2.6%, to $16.70 an ounce.
March copper HGH5, -0.11% eased 1 cent to $2.608 a pound.
April platinum PLJ5, +0.85% rose $13.50, or 1.2%, to $1,180.70 an ounce, and March palladium PAH5, +0.58% added $3.80 to $780.40 an ounce.
