Modest Advance for Gold Futures

Contracts for April delivery of bullion add $6.70 to close at $652.90 an ounce.
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Updated from 3:10 p.m. EST

Gold prices edged higher Wednesday, but speculative buyers likely remained on the sidelines, waiting for confirmation of a potential new uptrend.

Contracts for April delivery of bullion added $6.70 to close at $652.90 an ounce on the Comex division of the New York Mercantile Exchange. The bullion exchange-traded funds,

iShares Comex Gold Trust

(IAU) - Get Report

and

streetTracks Gold Shares

(GLD) - Get Report

, were rising about 0.5% recently.

"I think hot money will eventually pour right back in just like it fell out last week," says Carlos Sanchez, an analyst at New York-based specialty consulting firm CPM Group.

Spot prices flirted with the $690 level last week before retreating rapidly as speculators dumped bullion after volatility in the equity markets sparked a flight to cash.

But the same factors that made gold attractive prior to last week -- fears about the strength of the economy and worries about rising inflation -- still remain in evidence and will likely lure investors back to gold, says Sanchez.

Before all that happens, there could be another dip, if what one chart watcher says proves correct.

"Gold feels kind of heavy here," says Rich Ishida, president of Pasadena, Calif.-based MarketVane, a market-sentiment polling organization. "Before the hesitant bulls become confirmed bulls, they will want to see if support holds."

A likely level for technical support would be at around $625 for the April futures contract, or slightly below that for spot gold.

On the economics front, market observers saw evidence of a mixed economy when the

Federal Reserve

released its beige book report at 2 p.m. EST.

"Several districts noted some slowing," the document stated. "Boston reported some softening, and Dallas said economic activity continued to decelerate."

That news came after the Comex close, but such reports have the capacity to move the value of the greenback relative to other currencies and gold.

A continued period of slower economic activity would likely put downward pressure on the dollar and boost gold; the two tend to move inversely.

One dollar was recently buying 116.322 yen, down from 116.62 yen late Tuesday, while one euro was buying $1.3175 vs. $1.3123 previously.

Back in gold, on the supply side, South Africa's production fell 7.5% to 275 tons in 2006, according to new data from the country's Chamber of Mines. It marks the lowest level of output since 1922. Despite the drop, South Africa still mines more gold than any other country, slightly ahead of the U.S.

Turning to the miners, the Chicago Board Options Exchange Gold Index, which tracks a basket of gold stocks, was up 0.5%, with shares of

Harmony Gold

(HMY) - Get Report

, ahead 0.2%.

Goldcorp

(GG)

was slipping 0.2%.

As for base metals, copper contracts were up about 7 cents at $2.78 a pound.

"The recent trend of copper stock outflows across warehouses spanning Asia, Europe and the U.S. reflects firming demand conditions in our view," states a report from the commodities desk at Barclays Capital in London. "We expect further price support for copper to emerge," owing to strong imports in to China.

Elsewhere, CIBC World Markets raised its rating on shares of Canadian zinc producer

Teck Cominco

(TCK)

to sector outperform from sector perform, sending the shares higher by about 1% recently.