Dollar's Dive Drives Gold
Simon Constable
11/24/06 - 11:27 AM EST
A slumping dollar helped propel gold higher Friday, and observers say there could be more to come.
Prices for February delivery of gold were recently surging $9.50 at $644.90 an ounce on the Chicago Board of Trade, and the exchange-traded funds, which hold the metal, followed suit. Shares of
streetTracks Gold Shares and
iShares Comex Gold Trust(IAU Quote), were up 1.7% and 1.3%, respectively.
The dollar, which tends to move inversely with changes in the value of bullion, crossed the psychologically important $1.30 level vs. the euro. Recently the euro was buying $1.3088, up from $1.2942 late Thursday and its highest level since April 2005. The greenback was also losing against the yen, hitting a 3-month low of 115.73 yen vs. 116.27 yen previously. (Click
here for more on the dollar's decline.)
"I don't think this is the end of the dollar weakness," says Paul Tustain, founder of U.K.-based
BullionVault.com, which provides an e-trading platform for retail gold investors. "A reality check needs to come on U.S. finances or the dollar will weaken further."
Tustain says he's seen robust demand recently from buyers who want to hold physical metal and remains bullish for the longer term.
On the technical side, some observers see price consolidation on the cards, at least for a while. "A pullback wouldn't surprise me as resistance kicks in at current prices," says Larry Levin, president of Chicago-based
SecretsOfTraders.com. "I have a feeling we'll trade sideways for a while."
Longer term, however, he says the market top at around $725 reached in mid-May will only be important when it is breached, and cautions traders not to view the peak as a major resistance level. Presuming it is breached it will then provide firm technical support, Levin says.
In other news, the Moscow-based
Interfax news agency reported that Russian gold production dipped 1.3% to 142.4 tons in the first 10 months of the year, compared to the same period in 1005. Falling mine output, down 1.8% at 128.8 tons was offset by increases in secondary production.
Among the miners, shares of
Meridian Gold(MDG Quote) were jumping 5.4%, while those of
Agnico Eagle Mines(AEM Quote) were jumping almost 6%.
In base metals, electronic trading on the Comex saw prices for the March contract jumping 9.9 cents to $3.235 a pound, on a combination of supply concerns and currency factors.
"Shanghai stocks of copper fell 4,435 tons this week,
so shorts are covering," says William Adams, an analyst at
Basemetals.com in London.
In steel, observers see prices in China softening with ongoing weakness.
Chinese "steel demand growth in 2006 is slowing and will likely continue to decrease in 2007 due to expected lower GDP growth next year," states Shanghai-based Growell Research & Consulting in its latest
China Steel Briefing. The firm says local prices for steel declined this week, and the softness should continue through December.
Shares of steel-maker
Nucor (NUE Quote) were slipping 0.7% recently.
