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Gold futures close with gains on safe-haven buying
MarketWatch
Aug 10, 2007
Gold futures rallied Friday, as traders recognized the metal's allure as a safe haven amid worsening credit market troubles that prompted a fresh injection of cash by several central banks.
"Suddenly, the world is realizing that gold is still a safe haven asset," said James Moore, metals analyst at TheBullionDesk.com. "We've seen pretty substantial losses in equity markets."
"I think this is genuine safe-haven buying," Moore said.
Gold for December delivery rose $8.80 to close at $681.60 an ounce on the New York Mercantile Exchange. However, the contract posted a loss of $2.80 on the week.
"Gold investors breathed a collective sigh of relief today as signs of 'proper' behavior in the metal finally emerged," said Jon Nadler, analyst at Kitco Bullion Dealers, in emailed comments.
"The massive injection of liquidity that is taking place globally was also followed by the Fed in an attempt to stabilize values and nerves," Nadler said. "Gold benefited from that action but also from being directly in demand."
Central banks in Europe, Asia and the U.S. injected billions of dollars into banking systems Friday, moving to further boost liquidity in markets suffering the ripple effect of the subprime-credit crisis and saying they stood willing to provide more cash. Read more.
The Federal Reserve said Friday it's providing liquidity "to facilitate the orderly functioning of financial markets." In a brief statement, the Fed said it will provide reserves "as necessary" through open market operations to promote trading in the federal funds market at rates close to 5.25%. See The Fed.
"You are starting to see some bargain-hunting buying coming here," said Charles Nedoss, gold analyst at the Peak Trading Group. "What the Fed did in terms of pumping liquidity into the markets is bullish for the metals. You're going to see some flight-to-quality type buying."
On Thursday, gold fell $13.50, or 2%, to close at $672.80, its weakest closing level since July 27. Read more.
"We saw the market sell off in a global liquid crunch as funds exited gold trades to meet cash margin requirements and to free up capital in general," said Zachary Oxman, senior trader at Wisdom Financial, in emailed comments. "This move was not in the direction of the primary trend and was, more than anything, a temporary move."
"Fundamental factors that support this market continue to be unchanged, which is another reason why I feel that the gold moves of this week to the downside were nothing but short-term liquidity plays that will not hold," Oxman said.
"The market is seeing a re-investment of fund money, strength in the Indian rupee, a positive seasonal pattern and concerns over labor issues in South Africa."
Asian and European equities posted steep declines.
On Wall Street, U.S. stocks crawled back from earlier steep losses, with the Dow Jones Industrial Average ending 58 points, or 0.4% higher, for the week. See Market Snapshot.
Other metals prices ended mixed on Nymex. September silver gained 16.50 cents to close at $12.870 an ounce and October platinum rose $4 at $1,279.30 an ounce.
September palladium fell $4 to end at $358.20 an ounce and September copper edged down 0.15 cent at $3.3595 a pound.
The dollar traded slightly lower against most major European currencies. Japan's yen was steady against the dollar but rose against most high-yielding currencies as investors sought to unwind positions on risky trades ahead of the weekend. See Currencies.
Crude-oil futures pared most of their losses. See Futures Movers.
Inventories and indexes
Gold warehouse inventories fell by 9,864 troy ounces to 7.14 million troy ounces as of late Thursday, according to Nymex data. Silver and copper supplies were both unchanged to stand at 133.3 million troy ounces and 21,655 short tons, respectively.
In equities, indexes tracking mining and metals stocks rose Friday. The Philadelphia Gold and Silver Index rose 1.2% at 144.32 points. The CBOE Gold Index rose 1.2% at 147.10 points and the Amex Gold Bugs Index gained 2% at 346.02 points.
As for sector exchange-traded funds, the StreetTracks Gold Trust ETF rose 1.7% at $66.57. The iShares Silver Trust ETF gained 1.4% at $127.65 and the Market Vectors-Gold Miners ETF rose 1% at $39.85.
Polya Lesova is a MarketWatch reporter based in New York.
Futures and options trading involve substantial risk.
