By Allen Sykora of Kitco News
(Kitco News) - Most-active gold futures poked above the much-anticipated $1,300-per-pounce level for the first time early Friday on the Comex division of the New York Mercantile Exchange.

“It’s a safe-haven story. A lot of people are scared of the recent performance of the dollar. A lot of money is coming into the commodities market, particularly the precious metals,” said Afshin Nabavi, head of trading at trade house MKS Finance.

Around 8 a.m. EST (1200 GMT), most-active Comex December gold was $3.90 higher at $1,300.20 an ounce after hitting an overnight peak of $1,301.30. Spot gold was $5.80 higher at $1,298.30.

“With the dollar being under pressure, that naturally creates a path of least resistance for gold. And that path right now is definitely to the upside,” said Sterling Smith, commodity trading adviser and market analyst with Country Hedging.

He also cited at least some apparent nervousness about European debt, with overnight weakness in the credit default swaps for Portugal, Ireland and Spain.

Gold has steadily climbed since 2001, after prices for the precious metal had fallen into the $250s a number of times between 1999 and 2001.

Analysts have cited a number of factors prompting the most recent round of safe-haven investment demand in recent weeks. This includes uncertainty about the strength of economic recovery in the U.S. and other Western nations, lingering worries about European sovereign debt that dominated headlines in the financial press earlier in the year and general uneasiness about devaluation of global currencies.

More recently, the focus returned to easy Federal Reserve monetary seen as hurting the U.S. dollar and ultimately contributing to potential inflation whenever the economy recovers. As the market rallied, the move was accelerated by buying from traders and funds that rely on technical charts.

Numerous brokerages and banks issued research reports in recent days suggesting that it was only a matter of time before gold hit $1,300. However, many also cautioned that this is also a likely area for some speculators to sell and book profits, meaning potential for at least a temporary price retreat from here.

Nabavi also suggested some kind of pause could be in order before any further advance to the $1,350 area.

“I think it ($1,350) is going to happen, but I don’t see it happening that quick, to be honest,” he said. “Not a huge correction. But it would be good to see at least (a correction to) the ($1,2)85-ish to ($1,2)80-ish area or something like that.”

Smith said he is surprised the market has not yet triggered buy stops, which are pre-placed orders activated when certain chart points are hit, around $1,300. It’s hard to say where these might lie since “we’re boldly going where no gold has gone before,” he said. But some points might include $1,305 and $1,318 in December gold.

“As far as the overall condition of the market, the bull looks fairly healthy here,” Smith said. “We haven’t had a lot of aggressive buying. We’ve made our move very quietly, which kept us getting too overbought in any way, shape or form.”

Smith put chart support for December gold around $1,289.

As for the rally over the last decade, much of the interest in gold “playing gold against dollar weakness,” R.J. O’Brien said in a report Thursday. This especially was the case from 2005 to 2008, as the euro strengthened to around $1.60 against the greenback. Historically, dollar weakness tended to lead to buying of gold as an alternative currency, plus a weaker greenback makes all commodities cheaper in other currencies and thus can boost demand.

Post your comment  (0)

Connect:

Post to Twitter

Post to Facebook