Gold taps highs above $1,300 as dollar deepens slide
MARKETWATCH 11:52 AM ET 5/2/2016
By Myra P. Saefong, MarketWatch , Rachel Koning Beals
One analyst says $1,400 in sight while another expects near-term correction
Gold futures headed higher for a sixth straight session Monday, touching highs above the psychologically significant $ 1,300-an-ounce level as the dollar remained depressed against its chief currency rivals.
June gold tacked on $5.80, or 0.5%, to $1,296.30 an ounce after tapping an earlier high of $1,306. Gold prices gained more than 4% in April.
Precious-metals markets Monday were "very thin" with China and London closed for a holiday, "so this first failure above $1,300 isn't a real test yet," said Adrian Ash, head of research at BullionVault.
Precious metals on Friday posted their highest settlements since January 2015, as a slump in the greenback to its lowest level in about 11 months coaxed investors toward dollar-denominated commodities, including gold and silver.
The ICE U.S. dollar index , a measure of the buck's strength against a basket of six rival currencies, was down 0.4% and tapped its lowest levels in about 11 months.
Against this backdrop, "gold had a brief pop above the $1,300 threshold, where it almost immediately was targeted with sell orders, as traders are taking off some decent profits," said Nico Pantelis, head of research at Secular Investor.
"We expect some more backing-and-filling around this price level in the coming days, maybe weeks, after which the uptrend will resume," he said. "The ingredients of the current price increase are still intact: lower U.S. dollar, lower economic activity and mixed signals from central banks around the world. As long as these ingredients are on the table, gold's rise will pursue."
Much of the recent weakness in the dollar followed the Bank of Japan monetary policy inaction (http:// www.marketwatch.com/story/no-additional-stimulus-from-bank-of-japan-negative-rate-holds-2016-04-27) late last week, that sent the yen lunging to an 18-month high against its U.S. counterpart. Some economists had expected the central bank to further ease conditions in an effort to boost inflation.
Gold bulls have largely pinned the metals rally on negative real interest rates in much of the world. Michael Armbruster, principal with Altavest, said gold at $1,400 an ounce in the next month would not surprise him.
But some analysts think gold could be due for at least a short-term correction given its quick, uninterrupted run.
"Even though net long positions in gold were reduced slightly in the week to April 26, we believe that speculative financial investors have been driving the gold price up significantly of late," Commerzbank analysts said in a note.
For instance, net long positions in silver expanded again to a record 71,200 contracts, while net long positions in platinum are at their highest level since early November after soaring by 20%. "As with many other commodities, we consider the rally of precious metal prices to be exaggerated and believe that correction potential has built up here," the Commerzbank team said.
On Monday, prices for July silver shed 4.4 cents, or 0.3%, to $17.775 an ounce. In April, prices for the metal surged about 15% higher.
In other metals trading, copper for July was down 1.7 cents, or 0.7%, at $2.267 a pound. Platinum for July climbed $7, or 0.7%, to $1,085.40 an ounce, while palladium for June edged down by $1.25, or 0.2%, to $626.40 an ounce.
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