The price for an ounce of gold topped the psychological level of $1,000 yesterday, closing up $5 and rallying another $7 this morning as the Dollar Index hit a new one-year low, thus forcing investors to look for more stable investment opportunities.
The Dollar Index measures the performance of the U.S. dollar against six other currencies and has dropped for six consecutive days to its lowest point in almost a year.
According to Reuters, traders are watching to see if gold can sustain its rise back above $1,000 and have expressed concern the metal’s climb to 18-month highs this week was overdone amid weakness in physical demand and rising scrap sales.
Many traders and investors are now anxious to see if prices can sustain these levels and test the all-time high of $1,023.50.
“With the dollar marking a new year low and the magical mark of $1,000 having been taken out, you would have expected more price action,” Commerzbank analyst Eugen Weinberg said this morning to Reuters. “That it hasn’t happed I interpret as a relative weakness.
“If this mark is not taken out on a weekly basis and should the price stay below $1,000 an ounce, I would not be surprised to see some selling next week.”
So far this morning, gold is trading up 0.76%, another $7 increase off of yesterday’s high. And, other strategists feel differently about the rise of gold prices and predict further advancements of the precious metal.
“Currency movements will be the principal driver for gold, and the impact of the U.S. dollar seems to have regained its prominence, despite a number of potential obstacles,” Standard Chartered said in a note.
“With the U.S. dollar likely to weaken further, gold should average $1,050 an ounce in Q4.”
Suki Cooper, an analyst at Barclays Capital, added to the bullish sentiment as he stated in a note that gold’s gains may continue “given concerns over rising inflation and our expectations for the dollar to weaken further.” The bank expects prices to average $940 an ounce this year and $970 an ounce next year.
The run-up in gold prices, however, is primarily due to investment demand rather than physical demand. Demand for gold products in primary markets such as India, Turkey and the Middle East has been tepid as prices have risen without the evidence of stability at these higher values. Even the widely popular SPDR Gold Trust said its holdings were unchanged on Thursday for a sixth consecutive day.
Moment of Silence
The Comex division of the New York Mercantile Exchange asked traders to refrain from trading for one minute at 8:46 a.m. and 9:03 a.m. in New York, when airplanes crashed into the two World Trade Center towers eight years ago and again at 9:59 a.m. and 10:29 a.m., the times when each tower collapsed, according to a notice to members obtained by Bloomberg News.
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