GOLD TILTS HIGHER AS ECONOMIC DATA DISAPPOINTS
By Myra P. Saefong and Sarah Turner, MarketWatch
SAN FRANCISCO (MarketWatch) — Gold futures tilted higher Thursday, rebounding after a sharp decline in the prior session, as investors parsed through a mountain of economic reports in the U.S.
Weak regional manufacturing data and a bigger-than-expected decline in last week’s jobless claims helped spur safe-haven demand for gold.
“Those who had thought that it’s all rosy cozy for U.S. economy will now move into sidelines,” said Chintan Karnani, an independent bullion analyst based in New Delhi.
Gold for delivery in April GCJ3 +0.04% climbed $4.80, or 0.3%, to $1,582.80 an ounce on the Comex division of the New York Mercantile Exchange after trading at an intraday low of $1,554.30.
Reuters Gold futures tilted higher Thursday.
On Wednesday, gold skidded $26.20, or 1.6%, to settle at $1,578 an ounce, marking its fifth straight session of losses. Read: Gold sinks below $1,600 amid ‘death cross’ talk.
Prices fell even further in electronic trading Wednesday evening after the Comex close following the release of minutes from the Federal Reserve’s January meeting.
The Fed minutes stoked concerns that policy makers could pull back on their massive quantitative-easing program, as the U.S. central bank said that it would review the program in March. Read: Fed, uneasy over ‘QE,’ plans bond-buy debate.
The Fed’s quantitative easing has supported gold due to worries that it may spur inflation and weaken the dollar. Any indication that the Fed may scale back or end bond buying tends to put pressure on gold prices. Gold is seen traditionally as a hedge against inflation and investors often flock to the metal as a safe-haven investment.
A pullback in quantitative easing can be seen as a reaction to an improving economy, and analysts at HSBC said the recent “ongoing liquidation” in gold prices “seems to be in response to an easing of financial-market anxieties and equity-market strength.”
“Gold also was undermined by a drop in the 50-day moving average below the 200-day moving average, which encouraged technical selling,” the analysts said. It’s considered a bearish signal and some refer to it as a “death cross,” though technically that’s not completely accurate. Read: Gold's so-called death cross is not its only problem.
But on Thursday, U.S. economic data weren’t all upbeat.
Last week’s jobless claims climbed more than expected and data on manufacturing activity disappointed the market. See: Weakening new orders hit manufacturing.
Why Is gold slumping again?
The price of gold, which touched $1,750 an ounce in December, is now around $1,600 - and falling.
The Philly Fed’s gauge of regional manufacturing activity fell to negative 12.5 in February from negative 5.8 in January. Analysts had expected the Philly Fed index to rise to a reading of positive 1.6.
“The Philly Fed numbers have been the biggest catalyst for the gold rise,” said Karnani, “but it is too early to say whether the rise will be sustainable or that the rise is another bear rally.”
A daily close in Comex gold below $1,566 “will reaffirm the bearish direction” for Friday, he said. Also Friday, “Indian demand for gold will zoom” as banks reopen after a two-day national strike, and there are no U.S. economic numbers tomorrow so gold will likely see technical trading.
Buying Opportunity?
Still, Tyche Group associate director Martin Hennecke said that he believes gold’s recent losses present a buying opportunity.
He said that last weekend’s Group of 20 statement, in which countries pledged not to engage in competitive devaluation of their currencies, as well as the Fed minutes and gold selling in the last quarter of 2012 by notable investors, have spooked the markets lately.
Hennecke said, however, that the debt position of many countries remains as weak as ever, and he believes that they will continue to print money to devalue their currencies in order to control debt.
“They have no choice but to print,” he said. “I think there will be upside [for gold] as people come to realize that the crisis isn’t over.”
Around the wider metals complex, March silver SIH3 +0.22% rose 19 cents, or 0.7%, to $28.81 an ounce, while March copper HGH3 -1.29% lost 5 cents, or 1.5%, to trade at $3.55 a pound.
Platinum for delivery in April PLJ3 +0.26% dropped $32, or 1.9%, to $1,615.10 an ounce, and March palladium PAH3 -0.22% fell $6.85, or 0.9%, to $729.55 an ounce.