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U.S. gold hits two-month high, sharp ETF inflow seen
Fri Jul 20, 2007
Reuters
NEW YORK (Reuters) - U.S. gold futures rallied to a two-month high in heavy trade Friday, capping a week of solid gains fueled by renewed fund buying and as investors sharply increased holdings of bullion held by gold exchange-traded funds (ETF).
Analysts said that gold was poised to retest the psychological $700 level in the near-term because of a combination of bullish factors including a weakening dollar, firm energy prices and improving jewelry demand.
Most-active gold for August delivery (GCQ7: Quote, Profile, Research) on the COMEX division of the New York Mercantile Exchange was up $6.60, or 1 percent, at $684.70 an ounce, dealing between $675.80 and $687.60 -- which marked its loftiest level since May 10.
Zachary Oxman, senior trader at Wisdom Financial in Newport Beach, California, said that gold's fundamentals were improving, citing renewed inflows by funds and a strengthening Indian rupee, which boosts jewelry demand from top gold consumer India.
"In the intermediate term, it looks like the market is a little overbought, but today's rally pushes through that argument and put it more to a long-term trend towards $700," Oxman said.
Gold has attempted several times to break above the $700-level and retest the 26-year peak at $730 set in May 2006, but so far has failed this year.
Joseph Guzzardi at Sabin Commodities said from the COMEX floor that the falling dollar and stronger energy prices had kept the precious metals market up most of this week.
"Some fund buying is coming back in here," he said.
Guzzardi also said that gold futures might be a little overdone, but he expected prices could still go slightly higher in the near term.
COMEX estimated final volume at a busy 122,692 lots, and gold options at 13,447. Turnover at Chicago Board of Trade's electronic 100-oz gold futures was 27,329 lots at 2:21 p.m. EDT (1821 GMT) http://www.cbot.com/cbot/pub/page/
RALLY BOOSTS ETF HOLDINGS
August gold has rallied more than $35, or nearly 6 percent, since it closed at $650.60 on July 5.
Bullion's rise prompted investors to increase holdings in StreetTRACKS Gold Shares (GLD.N: Quote, Profile, Research), the No. 1 gold ETF.
Most recent data showed bullion held by StreetTRACKS (XAUEXT-NYS-TT: Quote, Profile, Research) increased to 497.15 tonnes, more than 20 tonnes above 473.45 tonnes reported on July 6.
Changes in gold and silver ETF holdings are closely watched by market participants because sharp inflows in gold ETFs could be a bullish signal as it shows longer-term retail investors are entering the market.
At 2:37 p.m., spot gold was quoted at $682.90/683.70 an ounce, higher than $673.90/674.50 late Thursday. The London afternoon gold fix was $681.60.
In mining news, the world's biggest platinum producer, Angloplat (AMSJ.J: Quote, Profile, Research), will hold further wage talks with South Africa's biggest mining union next week after it did not file a dispute as expected, the firm said on Friday.
The development could lead to a wage deal and avert a possible strike in South Africa, the world's biggest source of platinum group metals.
Meanwhile, Stillwater Mining said it might miss its production goal due to weaker production and the recent labor stoppage at a mine and some processing facilities.
Stillwater is the only U.S. producer of palladium and platinum and is the largest producer of platinum metals outside of Russia and South Africa.
The company had previously given a 2007 mine-production outlook of 615,000 to 645,000 platinum-group metal ounces. Stillwater said it will give a new production forecast at a later time.
NYMEX October platinum (PLV7: Quote, Profile, Research) closed up $8.10 at $1,346.60 an ounce. Spot platinum fetched $1,330/1,334 an ounce.
September palladium (PAU7: Quote, Profile, Research) inched up 80 cents to end at $374.75 an ounce. Spot palladium was quoted at $370/374 an ounce.
COMEX September silver (SIU7: Quote, Profile, Research) closed up 2.8 cents at $13.403 an ounce, trading between $13.300 and $13.500.
Spot silver was quoted at $13.27/13.32 an ounce, compared with $13.24/28 late Thursday. London silver was fixed at $13.290.
Futures and options trading involve substantial risk.
