BULLION AFTERNOON – Gold prices up, silver above $20 on dollar weakness

Dec 27, 2013 - 4:14 PM GMT

London 27/12/2013 –¬†Gold and the precious metals benefitted from a post-Christmas bounce on Friday, pushing at technical resistance as the euro rallied against the dollar.

Spot gold prices soared to a high of $1,219.45 per ounce and silver climbed above $20, setting a seven-session high at $20.12 per ounce.

Gold prices were last at $1,215.30/1,215.80, up $6.15 on the close, while silver gained 26 cents to $20.05/20.10 per ounce.

“Gold prices are looking firmer this afternoon as the metals generally benefitted from short-covering heading into year-end,” FastMarkets analyst James Moore said, adding that the sharp movement in the euro/dollar exchange rate also played a role.

“That said, gold has stalled ahead of the technical resistance while gains are likely to continue to draw liquidation from stale investors amid increasing equity gains and stronger treasury yields,” Moore added. US 10-year bond yields were near three percent today.

The euro rallied markedly against the dollar seeing the highest exchange rate since October 2011. The single currency peaked at 1.3983 against the dollar, though it has since reclined to 1.3798.

RBC said the weakness in the dollar was mostly a reflection of speculation that the US Federal Reserve may be a long way from raising interest rates. Others also pointed to continued fiscal negotiations.

In equities, the S&P 500, FTSE 100 and Nikkei are all firmer, and in other commodities, the base metals and oil all gained ground. The data calendar was light, but overnight, Japan released a flurry of numbers, including the November unemployment rate at four percent, and the December Tokyo Core CPI at 0.7 percent.

Yesterday, the weekly US new unemployment claims number came in at 338,000, which was lower than expected, and should have been gold-negative and dollar-positive.

In the rest of the precious metals complex, platinum prices have been the star performer over the past two sessions, adding more than three percent or $46 to $1,368/1,378 per ounce, while palladium prices are up $19.50 or more than two percent over the past two sessions at $711/718 per ounce.

Analysts said the PGMs were due a bounce, having been dragged down by gold on unrelated fundamentals in recent sessions. There is also the potential for strike action in major producer South Africa.

The Association of Mineworkers and Construction Union, a militant South African union with a majority position on many of the platinum and palladium mines, have indicated that it may strike at top producer Anglo American Platinum, although it has pushed a decision back until next year.

(Editing by Martin Hayes)