MW: Gold futures extend rally as U.S. dollar sinks
Gold futures extended their rally into Asian trading on Wednesday, finding continued support after the U.S. dollar hit a fresh 14-month low, increasing investment demand for the precious metal.
"Gold's move is all about the demise of the dollar," said Cameron Peacock, a market analyst at IG Markets in Melbourne.
Gold for October delivery, the thinly traded front-month contract, was up $2.90 at $1,067.10 an ounce in electronic trading on Globex by Wednesday afternoon in Tokyo.
On Tuesday, the contract rose $7.50 to close at $1,064.20 on the Comex division of the New York Mercantile Exchange, the highest settlement price for a front-month contract. It had climbed as high as $1,068.40.
The most-actively traded December contract was last up $4.20 at $1,069.20 on Globex, after touching a high of $1,071.10. That contract had gained $7.50 to $1,065 in New York Tuesday.
Spot gold was up $3.20 at $1,067.30 per ounce after a high of $1,069.70, according to Kitco.com.
"Tonight, our Chinese clients are telling us it is their heritage to own gold," said Ben Johnson, owner of First Securities Northwest in Portland.
He explained that many years ago, gold and copper were used as a medium of exchange in China and elsewhere. Now "their rational has intuitively and practically come home today," he said.
Dollar demise
Unfortunately for the dollar, the apparent favoritism toward gold among investors has come at the expense of the greenback.
In currencies trading, the dollar continued its slide against most of its major rivals, with the euro rising to $1.4887, from. $1.4851 late in New York Tuesday. One dollar bought 88.88 yen, down from 89.66 yen.
On Tuesday, the dollar index (DXY 75.61, -0.37, -0.48%) fell to its weakest level in 14 months. See Currencies report.
If that trend continues, it's quite possible that gold's gains will also continue into next week, said Peacock.
"As long as the dollar keeps drifting, which just about everyone thinks it will, we should not be surprised to see gold keep advancing," he said.
On the other hand, Chintan Karnani, an analyst at Insignia Consultants voiced doubt that gold prices will continue their rally. "I have my doubts over the sustainability of gold price rise," he said. "The quicker the rise the sooner will be the chances of a correction. I do not believe that gold prices will sustain the current prices into next week. "
