Gold Climbs as Safe Haven

Gold Climbs as Safe Haven
Gold Climbs as Safe Haven

Gold ended higher yesterday, as prices rallied after news that the US economy shrank in the fourth quarter buoyed the metal’s appeal as a safe haven. Gold is trading this morning in the Asian session at 1680.55 giving back a bit of yesterday’s gains. Gold holdings of SPDR gold trust, the largest ETF backed by the precious metal, declined to 1,328.09 tons, as on Jan 30.

The euro climbed to a 14-month high and gold rallied yesterday after the Federal Reserve left its monthly $85 billion bond-buying stimulus plan in place. The Fed said economic growth had stalled but indicated the pullback was likely temporary, describing the nation’s job market as continuing its modest pace of improvement. It repeated a pledge to keep purchasing securities until the outlook for employment improves substantially.

A report earlier in the day showing the U.S. economy contracted in the fourth quarter had already bolstered expectations the Fed would continue its easy monetary policy. GDP data, which showed the world’s largest economy in the fourth quarter unexpectedly suffered its first decline since the 2007-09 recessions, supported that expectation. Gross domestic product fell at a 0.1 percent annual rate after growing at a 3.1 percent clip in the third quarter.

Base metal prices traded on a positive note in yesterday’s session. The gain was on optimism that the US Fed would continue the purchases of $ 85 billion of securities a month.  Better data from the US on the consumer spending and a recovery in Europe also supported an upside in the copper prices. Some correction was witnessed after US GDP contracted more than expected and erased some of the gains.   Weakness in the DX along with decline in inventories also supported an upside in the prices. Copper prices rose to the highest level in almost 4-weeks.  Nickel reached a 3-month high while zinc and lead also rallied. Copper futures for March delivery closed up by 1.1% at $3.7355 on the COMEX division of the NYMEX. Copper exports from Japan surged 27% last year to the highest level since 2009 amid a decline in domestic demand as users increased production overseas.

Silver holdings of ishares silver trust, the largest ETF backed by the metal, increased to 10,443.19 tons, as on Jan 30. Silver continued to add to the gains of the previous day and settled 2 percent higher in yesterday’s session tracing strength in the gold prices along with weakness in the DX.  Firmness in the entire base metals also pushed prices upwards. Silver is trading at 32.093 dipping a few pips this morning after it skyrocketed yesterday. Traders are seeing market selling with many sell orders being filled at the 32.00 price level.

 

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