Gold Gains as Dollar Dips

Speculative interest in the metal is revived as its chart maintains a bullish pattern.
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Updated from 11:32 a.m. EST

Gold plowed ahead Tuesday, helped by speculator interest and a softer dollar.

December-dated gold contracts rallied $6.60 to close at $628.70 an ounce on the Comex division of the New York Mercantile Exchange. At the same time, the February contract lifted $6.70 to end the session at $635.10. Traders have been rolling positions to the later-dated contract, with open interest in the February contract now standing at 10.2 million ounces vs. 13.1 million for December.

The firm futures prices helped lift the exchange-traded funds also, with

streetTracks Gold Shares

(GLD) - Get Report

and

iShares Comex Gold Trust

(IAU) - Get Report

both ahead by 1.1% lately.

"It seems like the gold market is seeing its own speculative interest rekindled," writes Nell Sloane, an analyst at NS Futures, who also expects buying by gold bulls to occur on price dips.

A modestly weaker greenback also helped boost bullion prices. The dollar was recently buying 117.9 yen, down from 118.04 yen late Monday. The euro was trading at $1.2833, up from $1.2814 previously. Gold prices tend to move inversely with changes in the value of the U.S. currency.

From a technical analysis viewpoint, chart-watchers spy bullish signs for the yellow metal.

December gold prices are above their 100- and 200-day moving averages, writes Randy Diamond, an analyst at Miller Tabak, who notes the gold chart will continue to look positive if prices stay above $621.

In stocks, investor interest remained focused on the big M&A transaction announced earlier this week, with research analysts brining out a bevy of ratings changes for

Phelps Dodge

(PD) - Get Report

and

Freeport McMoRan Copper & Gold

(FCX) - Get Report

. The latter said Sunday evening that it would acquire the former for $25.9 billion.

Stifel Nicolaus and Citigroup both dinged Phelps, cutting the stock to hold from buy, while RBC Capital Markets raised its price target for Phelps' stock to $125 from $110. The stock was recently trading at about $118, down 2%.

Canaccord Adams and HSBC similarly downgraded Freeport to hold (or the equivalent), while Stifel Nicolaus pruned its price target on the shares to $74 from $85. Shares were recently trading at $56, up 0.7%.

Among the other miners,

Harmony Gold

(HMY) - Get Report

and

AngloGold Ashanti

(AU) - Get Report

, were lifting 3.3% and 3.4%, respectively.

In the official sector, the European Central Bank announced it had sold 97 million euros of gold and receivables, or about 6.2 tons, last week.

Elsewhere in precious metals, platinum was zooming higher, with the London spot market logging a price of $1,355 an ounce in the afternoon, down from $1,390 in the morning. But prices were still generally ahead, up from $1,262 Monday morning and $1,086 at the beginning of the month. Persistent rumors of an ETF being started for the metal have failed to subside.

"Whether or not the fund will actually launch is still up for debate, as is the perception that the avalanche of commodity-related ETFs is a sign of a top or bubble in the sector," says Jon Nadler, an analyst at Montreal bullion dealer Kitco. Also weighing on the minds of end-users of the metal is the relative lack of liquidity of the platinum market relative to gold, which augurs more price volatility as long as the rumors stay active.

Palladium, a close cousin of platinum, was gaining also, with London dealers posting a spot price of $328 an ounce in the afternoon, vs. $321 a day earlier.

Benefiting from the rally were platinum and palladium producers

Stillwater Mining

(SWC)

and

North American Palladium

(PAL)

, ahead 8.2% and 4.2%, respectively.

In base metals, copper was headed upwards, with Comex contracts for March delivery adding 6.9 cents to close at $3.1475 a pound. Since the beginning of November, London Metal Exchange inventories of the red metal have risen to about 158,000 tons Monday from 135,000. The added supply has helped bring down the price of the LME benchmark three-month contract from over $3.30 a pound at the start of the month.

"We still think copper prices will remain under pressure," writes Tobin Gorey, a commodity strategist at Commonwealth Bank of Australia in Sydney, with technical weakness and inventories inching higher.

"Copper is also at price levels where there are regular reports of theft even in rich countries such as the U.S. and Italy," he adds.