Investors thinking that gold would follow oillower got a surprise Monday as the bulls tookover and sent bullion prices higher.
While nearby crude futures were sinking $2.17 at$58.58 a barrel on the New York Mercantile Exchange,gold prices spurted upward, breaking what some haveseen as a pattern of prices for the two commoditiestending to move in step. Contracts for Decemberdelivery of gold closed up $6.40 at $607.40 an ouncealso on the Nymex, and the bullion exchange-tradedfunds followed suit, with
iShares Comex GoldTrust
both gaining about 1%recently.
Friday's close above the psychologicallyimportant $600-an-ounce level had helped boostsentiment when the Far Eastern markets opened overnight, and anintraday rally seemed to feed on itself.
"With the Asian trade lifting gold prices in theface of numerous bearish outside-market developments,it would seem like the trade has returned to the ideathat physical buying will generally support prices,"writes Ben Mancha, an analyst at NS Futures inChicago.
One of those other bearish factors for gold wasthe dollar, which was mixed againstthe major currencies. The price of gold tends to sinkwhen the U.S. currency is strong, but the relationshipdidn't hold Monday. Instead, while bullion was jumping,the greenback was gaining against the euro, which was trading at$1.2726 recently vs. $1.2735 late Friday. The greenback was,however, losing slightly against the yen, buying117.42 yen vs. 117.58 yen previously.
Meanwhile chart watchers spy a particularlybullish confluence of events for the yellow metal.
"Gold prices crossed the exponential 200-daymoving average and also broke the downward trend lineresistance at about $601 for the first time since itwas established in May," says Marc Eckelberry, a LosAngeles-based futures trader and author of the
markets blog. As gold moved higher later in the session, an inverted head-and-shoulders formation was confirmed asthe neckline was pierced at around $606, he adds.
Elsewhere in gold, a
bearish report by London-based specialty consulting firmVirtual Metals, which forecasts a huge oversupply ofbullion in 2007, seemed to be quickly shrugged offby market participants.
Among the miners,
got dinged twice -- getting downgrades from both BMO Capital Markets and CIBC World Markets. The former downed the stock rating to market perform from outperform, while the latter cutit to sector underperform from sector perform. Investors took note, and the stock was recently down 1.5%.
"Cost control is still the biggest threat to thefortunes of gold-mining companies," notes a weeklymemo from U.S. Global Investors. "Rising costs areaffecting miners worldwide, in large part from thesteep price for qualified labor."
In base metals, Comex copper contracts slid back4.65 cents to close at $3.3585 a pound, likely onconcern that demand will slacken as the U.S. housingsector continues to cool.
In ferrous metals,
was recently trading down 2.5% afterKeyBanc Capital Markets and Jeffries both cut theirrating on the stock to hold from buy. UBS reiterated abuy rating and boosted its target share price for thestock to $69 a share from $60.
The majority opinion ruled in this case, however.
Among the giants, Prudential upped its price targeton diversified miner
to $260 from $240 and reiterated anoverweight rating. The stock was recently down 0.65% to $217.20.