Metal loses nearly 1% in the week
By Claudia Assis and Virginia Harrison, MarketWatch
SAN FRANCISCO (MarketWatch) — Gold futures lost ground Friday as investors eschewed commodities and decided to place their bets elsewhere.
Gold for August delivery GC1Q -1.16% declined $15.50, or 1%, to $1,487.30 an ounce on the Comex division of New York Mercantile Exchange, bringing weekly losses to nearly 1%.
“It’s really in line with the overall commodity decline,” said Jim Steel, a metals analyst with HSBC in New York. Drops for grains and oil were “pronounced,’ he added, spurring a general exit from commodities. U.S. stocks rallied Friday on a surprise increase for a gauge of manufacturing activity.
Gold futures had declined this week after some uncertainty about the euro zone’s debt problems lifted, stanching some of the safe-haven flow to the metal.
Greece approved an austerity plan and laws designed to implement it this week, straightening out the path for more financial aid to avoid a default. Read more on Thursday's metals action.
Despite the recent weakness, gold prices remain 4.6% higher this year.
The dollar index DXY +0.01% , which measures the performance of the U.S. unit against a basket of six rival currencies, pared its gains. The index recently traded at 74.371 from 74.314 in late North American trading on Thursday.
A rising greenback tends to discourage investment in dollar-priced commodities such as gold, and also takes away one of the pillars of gold investing, fear of dollar debasement.
Analysts at BNP Paribas said gold has been supported by inflationary pressures and some safe-haven buying as a result of the euro-zone debt crisis this year.
“The surge in inflationary pressures goes a long way towards explaining the strong demand growth for gold, notably in India and China, as consumers seek to hedge themselves against rising prices,” the analysts said.
The analysts forecast the gold price to average $1,510 an ounce in 2011 and $1,600 an ounce in 2012.
The broader metals complex tracked gold lower, with silver for September delivery SI1U -2.78% shedding 89 cents, or 2.6%, to $33.94 an ounce.
September copper HG1U +0.50% , however, gained 1 cent, or 0.3%, to $4.30 a pound, reversing paths.
Platinum for October delivery PL1V -0.53% declined $5.10, or 0.3%, to $1,721 an ounce, as the September contract for sister metal palladium PA1U -0.47% lost $3.15, or 0.3%, to $757.50 an ounce.
Investors grappled with some positive news on Friday, including a surprise increase for a gauge of manufacturing activity.
The Institute for Supply Management said its factory index rose to 55.3% in June, from 53.5% in May. Economists polled by MarketWatch had expected a decline.
News on the consumer sentiment front and construction spending wasn’t so rosy.
Consumer sentiment declined to 71.5 at the end of June from 74.3 in May, according to the Thomson Reuters/University of Michigan survey released Friday. Economists surveyed by MarketWatch had expected a final reading of 72.
Construction spending fell 0.6% in May, compared to the 0.1% decline economists polled by MarketWatch had predicted. Residential construction dropped 2.1%, a 7.1% decline from May 2010.
Claudia Assis is a San Francisco-based reporter for MarketWatch.
Virginia Harrison is a MarketWatch reporter based in Sydney.
