Other metals futures stumble, but metals equities mainly rise

Gold futures closed with a loss of almost $17 an ounce Monday, giving back part of last week’s gain of nearly 4% as strength in the dollar dulled the precious metal’s investment appeal.

“The gold price was reacting only to the U.S. dollar moves and on the smallest of moves,” said Julian Phillips, an analyst at GoldForecaster.com.

The August gold contract closed at $887.20 an ounce on the New York Mercantile Exchange, down $16.50, or 1.8%. It traded as low as $879 on Nymex earlier.The contract gained 3.5% last week, but lost 50 cents on Friday.

 ”Gold has moved to a short-term overbought condition on widespread … expectations of a breakout,” said Ned Schmidt, editor of the Value View Gold Report. But in emailed comments, he called such an assumption an “error.”
“Gold is likely to test the $850 level as the Federal Reserve fails to feed the dollar bears,” he said. “That price, given the longer-term bear market for the U.S. dollar, would represent a buying opportunity.”

Looking at the bigger picture, gold’s fundamentals remain “as sound as ever and inflation and stagflation concerns [are] rising internationally,” said Mark O’Byrne, executive director at Gold & Silver Investments Ltd.

Metals investors should look for any selling in gold to be “brief and shallow,” he said in a note to clients, “especially as oil prices remain near record levels on fears that Saudi Arabia’s promise to boost output may not be enough to quell supply concerns.”
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SAN FRANCISCO (MarketWatch) — Gold futures dropped $11 an ounce Tuesday to close at their weakest level in three sessions as a rally in the dollar against other global currencies dulled investment demand for the precious metal.

Federal Reserve Chairman Ben Bernanke signaled in a earlier speech his discomfort with the weak dollar’s ramifications for the U.S. economy. See Fed story.

“The proximal cause of today’s drop in gold was … Bernanke’s comments regarding commodities and the dollar,” said Brien Lundin, editor of Gold Newsletter. “The fact that he broke ranks with tradition and addressed the status of the dollar — which is the Treasury Secretary’s bailiwick — was remarkable enough to send a shudder through the gold and currency markets,” he said in emailed comments.

Gold for August delivery traded as low as $878 an ounce on the New York Mercantile Exchange. The benchmark contract fell $11.50 an ounce to finish at $885.50, its lowest closing level since May 29.

“Ben Bernanke’s dollar-supportive words had a chilling and immediate effect on both gold and oil,” said Jon Nadler, an analyst at Kitco Bullion Dealers.

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Gold futures climbed above $920 an ounce Tuesday to tally a gain of more than 6% during a four-session winning streak as a decline in the U.S. dollar and rising oil prices enhanced the metal’s appeal as an investment hedge.

“Capital seeking shelter from monetary debasement will continue to deviate to preservation assets such as gold and silver,” said Peter Spina, an analyst at GoldSeek.com.

Gold prices closed at their strongest level in a month.

“As oil nears $130, the historical relative value of gold to oil is now again at extreme lows,” said Spina, in emailed comments. “This measurement, among with others, places the true value of gold much higher than we are seeing it presently trade at.”

And with today’s very weak U.S. dollar and continual prospects of additional expansion of the money supply, “gold becomes even that more attractive at this present time,” he said.

Gold for June delivery climbed as high as $923 an ounce on the New York Mercantile Exchange, a level not seen since April 22. It closed up $14.40, or 1.6%, at $920.20.

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Gold futures closed near $900 an ounce Friday, marking their highest level in more than three weeks, as crude oil’s rally to a fresh record high near $128 a barrel boosted the precious metal’s appeal as an inflation hedge.

“Ever since gold became free trading in the early 70s, we’ve been telling you, ‘Buy it as an inflation hedge,’” said Peter Grandich, editor of the Grandich Letter. “Everywhere one looks they see prices and costs rising,” he said in emailed comments. And “as the inflation concerns grow, so should the price of gold.”

Gold for June delivery climbed to an intraday high of $904.50 on the New York Mercantile Exchange. It closed with a gain of $19.90, or 2.3%, at $899.90, a level it hasn’t finished at since April 23.

“Safe-haven buying is likely to have reemerged on both the surging oil price but also on the appalling consumer sentiment numbers which showed consumer confidence falling to their lowest levels since 1980 — 28 years ago,” said Mark O’Byrne, director at Gold & Silver Investments Ltd., in emailed comments.

The dollar extended losses Friday, despite better-than-expected housing data, after a weak consumer sentiment index reading kept alive doubts about the strength of the U.S. economy.

Read Full Marketwatch Article By Myra P. Saefong