DJ NY Precious Metals Review: Gold Ends Strong As Dlr Dives
NEW YORK (Dow Jones)--Gold futures on the Comex division of the New York
Mercantile Exchange hit fresh contract highs late Friday as the U.S. dollar
plunged to fresh historic lows against the euro and the partially expected
week-end bout of gold profit-taking failed to materialize.
The most active February contract (100-oz. each) settled $5.50 higher at
$457.80 per ounce - the highest close in the contract's history.
Gold prices struggled to find direction and follow-through interest over the
first half of the trading day and stretched to highs around $455.50 and then
dipped to a $450.10 low to no avail.
"The market was unsure of itself initially so we kind of just pushed sideways
through the morning," noted a dealer with a large U.S. investment bank.
However, February prices then took on a more purposeful tone late morning as
the U.S. dollar ground to fresh all-time lows against the euro. February gold
pushed steadily higher over the final hour or so of trading to settle just shy
of the $458 level.
Dealers noted that many short-term traders had expected a hefty spurt of
profit taking to emerge in gold Friday and so had established light short
positions in the market in the opening hours of trade.
As it became clear that no notable profit taking-led dip would emerge, those
short-term players were forced to cover their short exposure to the market and
add fuel to gold's late-session climb.
With the U.S. currency expected to endue further selling pressure over the
near term in the wake of Friday's disappointing employment report, more gains
in gold are deemed likely in the coming days as international investors seek
counter-cyclical locations for their funds.
The main upside goals for February gold include $460, $462 and $465, dealers
agreed.
That said, many short term gold traders remain wary of buying into the market
at the current time while speculative long exposure in gold futures lingers at
an all-time high level and technical indicators strongly suggest the market is
overbought.
As a result, more price volatility could be seen as short sellers also appear
in the market in a bid to preempt any corrective price retreats.
"I think we could see more people stepping in and trying to call the top for
the current move. It doesn't look like this rally is over, but it sure does
need a rest at some point," a Chicago-based commodities trader argued.
"We could well see more of this short selling in the morning and then short
covering in the afternoon if a sell off doesn't happen," he added.
Despite the growing consensus that a price pullback is in the cards at some
point, few players believe any retreat will be pronounced or sustained as the
longer term outlook for the dollar remains decidedly bearish and physical
demand for gold remains generally robust.
Consequently, support is expected to be found around $448, $446 and $444 on
any descent.
