US GOLD OPEN – Gold steady on seasonal demand hopes

Jan 9, 2013 - 2:30 AM GMT

New York 09/01/2013 – Gold futures straddled the 200-day moving average Wednesday with support coming from relatively strong physical demand, especially in Asia.

Gold for February delivery on the Comex division of the New York Mercantile Exchange was last down $2.40 cents at $1,659.40 an ounce. Trade has been in a narrow range of $1,657.50 to $1,666.00.

“After a poor start to the week on Monday, precious metals managed to make some headway yesterday, with gold eventually pushing past the $1,660 resistance level. The push higher came despite some dollar strength during US trading hours, as optimism over physical demand lent the yellow metal. With Chinese Lunar New Year celebrations approaching (commencing 10 February), we should see the usual seasonal increase in physical demand,” Standard Bank said in a note.

“Looking at activity in past years, it appears that there is still considerable room for more physical interest. This should continue to provide support for gold, although amid relatively lacklustre investor interest, it looks to be a slow grind upwards,” the bank analysts added.

On the side-side, South African producer Harmony Gold, the country’s third-largest gold producer, has suspended operations at its Kusasalethu mine near Johannesburg following violent unrest. The closure is expected to last about six months, with an estimated 100,000 ounces of lost gold production.

Gold yesterday was able to push through the 200-day moving average for the first time since a Fed-induced sell-off shocked the market last week.

“From a chart perspective, yesterday’s close above $1,661 yesterday was important as that was above a key support. But we’re still right at that level so it’s not assured that this market will move higher,” a US-based gold trader said.

While Comex gold did manage a fresh new high for the week overnight, the gains didn’t seem to be signalling a definitively bullish environment, the CME Group said in a market commentary.

“Gold might be drafting some minor lift from a slight improvement in macro economic sentiment in the wake of favourable Alcoa earnings news yesterday afternoon,” CME said.

“It’s also possible that gold is seeing some fresh spillover buying interest from news overnight that Japanese pension funds might begin to increase their gold holdings, because of a higher inflation targeting from the BOJ recently,” it added.

Speculation is growing that the Bank of Japan will consider easing monetary policy again later this month, while Japanese Prime Minister Shinzo Abe suggested that the BOJ set a 2 percent inflation target, double the current goal. This would be supportive of gold prices as the yellow-metal is often bought as a hedge against inflation.

Meanwhile, in the wider-markets, the euro was down a quarter cent at 1.3060 against the dollar, while Germany’s DAX and France’s CAC-40 were near unchanged.

As for the more industrial commodities, light sweet crude (WTI) oil futures for February delivery on the Nymex were down 13 cents at $93.02 per barrel and the most-activity traded Comex copper contract was at $3.6960 per pound, up 2.35 cents.

Comex silver for March delivery was down 7.5 cents at $30.390 an ounce. Trade has ranged from $30.310 to $30.575.

“Apparently silver was partially undermined by another round of analysts cutting their 2013 silver price forecasts overnight,” CME said.

“While the 200-day moving average in March silver is just above the current market at $30.818, seeing the silver market post some negative price divergence with the rest of the metals complex in the early Wednesday US trade has to be a little discouraging to the bull camp,” CME said.

Platinum futures for April delivery were last up $12.90 at $1,596.10 an ounce and the March palladium contract was at $680.10 an ounce, up $12.25.