DJ: PRECIOUS METALS:Comex Gold Hits Five-Week High As Dollar Falls
Weakness in the U.S. dollar and chart-based factors enabled gold futures to rally to their most muscular level in five weeks on Monday.
Analysts also cited some buying in anticipation that prices will move higher later in the year on inflationary concerns.
August gold rose $11.30 to $948.80 an ounce on the Comex division of the New York Mercantile Exchange. September silver climbed 22.2 cents to $13.625.
August gold hit a $955.40 high that is the strongest level since June 12. September silver peaked at $13.75, its strongest level since July 2.
The markets built on upward momentum developed last week, said Carlos Sanchez, associate director of research with CPM Group.
"We saw a large retreat occur today in the dollar," he continued.
As the gold pit was closing, the euro was up to $1.4209 from $1.4101 late Friday. The single European currency hit a $1.4250 high that was its strongest level since June 5.
Meanwhile, the September dollar index was down 0.385 point to 79.120 and was as weak as 78.925, its lowest level since June 3.
"If it's above 80, everything (gold and other precious metals) tanks," said Daniel Pavilonis, Lind-Waldock senior market strategist. "If it's below 80, everything rallies."
Technically, gold has been helped by its ability to hold above $900 earlier this month despite being in the period of historically softer summer demand, Sanchez said. Gold has been on the upswing after bottoming at $904.80 on July 8.
"As prices moved higher, you pulled in some investors and speculative activity," he said.
Some are looking toward autumn, when demand tends to pick up ahead of a number of gift-giving holidays around the world. And, said Sanchez and Pavilonis, there are concerns about longer-term inflation.
"More people are calling up to open accounts," Pavilonis said. "They see inflation over the horizon going into next year."
In fact, concerns about rising price pressures and the soft dollar are supporting commodities in general, he said. As gold was closing, the Continuous Commodity Index was up 4.22 points to 409.27.
As gold broke above chart points, short covering likely was occurring, said George Gero, vice president with RBC Capital Markets Global Futures. Traders will be watching the release of open-interest data on Tuesday to confirm this.
"When you see a market ignore bearish possible developments, it deserves real attention," Gero said. As an example, he cited gold's ability to remain strong despite the market wondering how the International Monetary Fund will go about selling 403 metric tons of the metal.
Analysts cited a seemingly early rollover in gold as yet another constructive factor. This signals longer-term buyers are in the market, Gero said.
Sanchez and Pavilonis both put the next resistance for August gold around the $960 area. Sanchez lists nearby support around $930.
Sanchez put support for September silver around $13, with resistance form $14 to $14.25.
Meanwhile, October platinum rose $12.80 to $1,188.90 an ounce, while September palladium gained $6.40 to $256 an ounce.
As is the case with other precious metals, the platinum group metals were underpinned by continued buying at lower levels following a recent pullback, technical momentum and the softer dollar, Sanchez said. Concerns about a labor dispute at Impala Platinum Holdings also offered support to the metal, said a trader.
Sanchez put resistance for October platinum around $1,200 and support around $1,100. In September palladium, he listed resistance in the $270-$280 region and support around $230.
-By Allen Sykora, Dow Jones Newswires; 541-318-8765; allen.sykora@dowjones.com
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