Gold climbed $3.50 this morning to trade at 1255.40 nearing a recent high, as volume for the day should be light with US traders out of the market for Martin Luther King Day. Silver also saw gains this morning to start off the week at 20.328 up by 24 pips. The US dollar remains flat near a 2014 at 81.33 and is expected to climb this week in anticipation of the Federal Reserve meeting coming on the 29th of the month. Precious metals rose on Friday as weakness in U.S. equities, strong fund buying and Asian physical demand lifted bullion to its fourth consecutive weekly gain. Holding at SPDR Gold Trust and iShares the largest precious metals EFT’s remained flat, offering little support for the metals. At the end of last week gold prices gained around 0.5 percent on the back of sharp rise in gold ETF’s which is managed under SPDR Gold Holdings Trust. Gold holdings was seen on a declining trend for most of the week but in the later part of the week a sharp rise of 7.5 tonnes or 1 percent was seen on Friday and stood at 797.05 tonnes. However, sharp upside in the prices was restricted due to strength in the DX coupled with concerns of QE tapering by the Federal Reserve. The US Dollar Index gained by 0.8 percent in the last week on the back of concerns of QE tapering by the Federal Reserve in its meeting on 28th-29th Jan’14. However, sharp upside in the currency was capped due to favorable economic data from the country. Further, rise in risk appetite in market sentiments after World Bank raising the growth forecast for 2014 and 2015 which led to fall in demand for the low yielding currency restricted positive movement in the currency. The currency touched a weekly high of 81.43 and closed at 81.36 on Friday.
Data from the Commodity Futures Trading Commission also showed on Friday that hedge funds and money managers raised their bullish bets in gold and silver futures and options for a third week amid a decline in stocks. Prices were finding a floor near $1,200 as that was close to the cost of production just a week ago. If gold prices were to fall below the cost of production, producers would be forced to shut loss-making mines, thereby creating a supply constraint that could push prices up. This might happen after the FOMC meeting next week.
Among other precious metals, spot platinum gained after the main trade union for South African platinum miners said the workers will strike this week at the world’s top three producers, hitting over half of global output. Platinum is trading at 1459.15 up by $4.30 while palladium is up $2.50 at 750.80.
Data released this morning from China has also had a positive effect with Chinese GDP printing at 7.7% for 2013, which is above the government forecast of 7.5% along with retail sales printing at forecast. Copper jumped 7 points after the data release to trade at 3.350. Industrial metals hit their highest in more than a week on Friday due to a supply shortfall in physical markets, but prospects of aggressive action by the U.S. Federal Reserve to curb stimulus capped gains. London copper was in the green this morning as markets responded to fourth quarter economic growth in China, the world’s top metals consumer, and instead focused on tight supply. China’s annual growth eased to 7.7 percent in the fourth quarter as investment and demand flagged, and analysts say growth could cool further in 2014 as Beijing focuses on rebalancing the economy and other major reforms. China is the biggest user of most industrial metals, accounting for around 40 percent of refined copper demand.