Thursday, October 7, 2010

Comex gold punches through $1,350/OZ on currency instability

By Tom Jennemann of Fast Markets:

New York 06/10/2010 - Gold on the Comex division of the New York Mercantile Exchange touched an all-time record of $1,351 an ounce on Wednesday as the dollar wobbled and a Federal Reserve official suggested that additional monetary stimulus is needed to curb unemployment.

Gold futures for December delivery closed Wednesday at $1347.70, up $7.40, for the day. The yellow metal traded in a range of $1,340.00 to $1,351.00, which was a new lifetime record.

"You're starting to hear that $1,400 is within reach now that we've taken out $1,350, where there was some resistance from a Fibonacci basis," Tom Pawlicki, an analyst at MF Global Holdings Ltd. in Chicago, said.

"The main focus is still on currency weakness and prospect that the Fed will conduct quantitative easing on Nov. 3," he added.

The dollar fell to a fresh eight-month low of 1.3947 against the euro on the back of a lacklustre jobs report.

Payroll processing company ADP reported that private US employers shed 39,000 jobs during September, after gaining a revised 10,000 in August. Estimates were for an increase of 23,000 new jobs.

The dollar also reacted negatively to comments made by Chicago Federal Reserve Bank President Charles Evans, who said he favours "much more accommodation than we've put in place."

"In the last several months I've stared at our unemployment forecast and come to the conclusion that it's just not coming down nearly as quickly as it should...This is a far grimmer forecast than we ought to have," Evans said in an interview with the Wall Street Journal.

Evens added that Fed should push interest rates down in order to move inflation higher and to even tolerate inflation above target of 2 percent to make up for lost ground.

"Until the Fed moves away from QE and towards a more normalized interest rate policy, gold is going to rally," Pawlicki said.

MKS Finance SA said in a note that currency-hedge buying continued today with long-term macro concerns lending support to gold.

"The outlook still seemed bullish considering the already high prices. Nevertheless, one should remain cautious ahead of numbers awaited tomorrow and Friday regarding Band and England and European Central Bank rate decision and non-farm payrolls in the US. Should the numbers add to speculation on further quantitative easing by the FED gold could fly to the moon and beyond," MKS said.

Comex silver for December delivery added 31 cents, or 1.4 percent, to close at $23.04 an ounce. Earlier in the day, the grey metal posted a fresh 30-year high of $23.09.

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