Safe haven fed by economic, debt concerns and yen intervention
By Myra P. Saefong, MarketWatch
SAN FRANCISCO (MarketWatch) — Gold futures tacked on as much as $18 an ounce Thursday as concerns about the U.S. economy and Europe’s sovereign debt crisis and Japan’s intervention in the currency market to stem the rise in the yen sent investors into their defensive shells — and to gold as a safe haven.
“Gold is still proving its character as a store of value in the current market environment, marked by equity markets tumbling sharply, in part, and continued high risk aversion,” analysts at Commerzbank said in a note to clients Thursday. “And the yellow precious metal evidently still has strong support.”
Gold futures for December delivery GC1Z +0.85% at recent check had added $12.50, or 0.8%, to $1,678.80 an ounce on the Comex division of the New York Mercantile Exchange, pulling back a bit from a climb of as much as $18 to an intraday high of $1,684.70.
The U.S. dollar surged the most since September against Japan’s yen Thursday, rallying after Tokyo authorities intervened and the nation’s central bank stepped up its monetary easing. Read more about the intervention and currencies action.
“Central bank currency intervention or money printing and competitive currency devaluations have resumed with gusto, which is of course bullish for precious metals as they cannot be devalued or debased,” analysts at GoldCore wrote in a report Thursday.
The dollar index DXY +1.49% , which compares the U.S. unit to a basket of six currencies, climbed to 75.075 from 76.96 late Wednesday in North American trading. Read more on currencies.
Gold and the U.S. dollar often move in opposite directions, as gold is priced in dollars. But the pair can rise in tandem when investors seek to avoid risk.
Safe haven shift
The Swiss central bank on Wednesday surprisingly lowered the key interest rate and announced a massive expansion of liquidity on the domestic money market, analysts at Commerzbank said. “These steps by the two central banks are aimed at halting the appreciation of their currencies and not burdening their domestic economies even more.”
“Up to now, both the Swiss franc and the Japanese yen have been regarded as ‘safe havens’,” they said. “If they lose this status, only gold would remain and the interest in gold should increase further.”
Gold marked a record settlement on Wednesday. As of Wednesday, gold has added $54, or 3.4%, since July 25th, the start of its most recent record run.
The precious metal found little support even after the U.S. Labor Department reported Thursday that the number of Americans who applied for unemployment benefits in the past week held steady at the 400,000 mark. Read about jobless claims.
“There is some evidence that gold is getting that silvery glow — that quasi-exponential trend which means too many contracts are following contracts and not the inventory,” said Richard Hastings, macro strategist at Global Hunter Securities, explaining that price spikes seem to go up at close to a 90-degree angle.
“So the risk of a correction is rising, perhaps on the way higher, but not without a correction,” he said. “There is little forecast-ability right now, which is typical of quasi-exponential moves in anything.”
Silver followed gold higher, with September silver SI1U +0.77% adding 22 cents, or 0.5%, to $41.98 an ounce. The contract finished Wednesday at its highest closing level since May 3.
September copper HG1U -1.45% , however, declined 6 cents, or 1.4%, to $4.26 a pound amid recent lackluster U.S. economic data.
Platinum and palladium also headed lower on Thursday. October platinum PL1V -1.85% was off $34, or 1.9%, to $1,751 an ounce. September palladium PA1U -1.96% declined $14.80, or 1.9%, to $780.30 an ounce.
