Palladium gains as auto sales recover in December after weak 2009
Gold (GC-FT) prices climbed in Europe on Wednesday as fresh New Year investment flows boosted commodities, with technical indicators pointing to the prospect of further gains.
The metal rose further after the euro recovered the early losses it made following a media report quoting European Central Bank executive board member Juergen Stark as saying the European Union would not bail out Greece.
Spot gold was bid at $1,126.40 (U.S.) an ounce at 1003 GMT, against $1,118.10 late in New York on Tuesday. U.S. gold futures for February delivery on the COMEX division of the New York Mercantile Exchange rose $8.00 to $1,126.70 an ounce.
“We have an attractive interest rate environment for gold, and investment inflows into commodities are supporting gold prices,” said Commerzbank analyst Eugen Weinberg.
“The performance of gold will also be dependent on what's going on in the dollar,” he added.
The euro fell against the dollar early on Wednesday after Stark's comments, though it later recovered losses. However, trading was cautious ahead of key U.S. jobs data on Friday as investors await evidence of how the economy is faring.
The key payrolls data is expected to shape expectations for when the Federal Reserve will start tightening its ultra-loose monetary policy and determine the direction of the dollar.
Strength in the U.S. unit curbs gold's appeal as an alternative asset and makes dollar-priced commodities more expensive for holders of other currencies.
Ahead of non-farm payrolls, traders are also eyeing ADP jobs data due later on Wednesday, which is seen as a key precursor to the main report.
Other commodities such as industrial metals also climbed, with copper rising to its highest since August 2008. The metals are being lifted by a switch out of currencies and into commodities, which is also lifting gold, traders said.
From a technical perspective, gold is poised for further gains, said analysts who study past price movements for clues as to future trading patterns.
“With net speculative length having unwound from recent extremes, the near-term prospects for gold have improved,” said technical analysts at Barclays Capital.
“Furthermore, with daily momentum rolling higher from oversold conditions and price action having repeatedly held trendline support, odds favour continued gains.”
If near-term resistance is confirmed, gold could push back towards the top end of its current range at $1,200 an ounce, they said, close to the record high of $1,226.10 an ounce it reached in December.
In India, historically the world's largest gold market, strength in the rupee ignited gold buying, but Chinese consumers have yet to return to the physical market despite the approaching Lunar New Year, dealers said.
Among other precious metals, silver (SI-FT) was bid at $17.98 an ounce against $17.76, platinum (PL-FT) was at $1,543 an ounce against $1,528.50 and palladium (PA-FT) at $421.50 against $418.
Platinum group metals traders welcomed news that U.S. auto sales hit 11.25 million in December, the fourth month of consecutive improvement after a weak year. Carmakers account for more than half of platinum consumption.
Elsewhere the world's biggest automaker, Toyota, said it sold 21 per cent more cars in China in 2009 than a year earlier, while GM's China sales rose 67 per cent.
The two platinum group metals hit their highest in over a year on Tuesday, with news that exchange-traded funds backed by the metals will be launched in the United States lifting prices.
“Signs of recovery in the U.S. auto market and expectations U.S. ETFs could soon begin trading continue to underpin PGM price,” said James Moore, an analyst at TheBullionDesk.com.
