Gold futures rallyGold futures rally on dollar, inflation data
By Myra P. Saefong, MarketWatch
Last Update: 10:08 AM ET Nov 30, 2006
SAN FRANCISCO (MarketWatch) -- Gold futures rallied Thursday morning as the dollar fell to a 14-year low against the British pound, while a bigger-than-expected rise in core inflation data burnished the metal's appeal as an inflation hedge.
Gold for December delivery was last up $9 at $644.50 an ounce on the New York Mercantile Exchange. The benchmark contract lost more than $5 in the past two sessions, as traders weighed mixed economic data on the health of the U.S. economy and as the dollar won back some ground against the euro.
That trend reversed on Thursday with the dollar falling against all its major rivals, especially sterling, on continued concerns the U.S. economy will grow at a rate more slowly than other countries. See Currencies.
"Unlike previous times, gold has not sold off after hitting key resistance around $640," said Peter Grandich, editor of the Grandich Letter, in an e-mailed comment. "This suggests a powerful move up is near and a run to $700 is likely."
There was further support in data showing core inflation rose slightly faster than expected, at 0.2%, in October. This kept the year-over-year gain in the core personal consumption expenditure price index at 2.4%, well above the Federal Reserve's implied cap of 2%.
Economists had been expecting core prices to rise just 0.1%, according to a survey conducted by MarketWatch. See Economic Report.
Meanwhile, oil prices extended their gains above $62 a barrel in a continued response to supply data that were viewed as bullish as well as to forecasts for cold weather across the U.S. in the coming days. See Futures Movers.
"The threat of oil-driven inflation and bearish sentiment toward the dollar will continue to draw investors towards gold and its unique properties as a store of value," said James Moore, analyst at TheBullionDesk in London, in a note to clients. "While gold is meeting stiff resistance around $640, dips continue to find good support and given the movements in oil and the dollar, will eventually push gold on to $650," he said.
Other metals joined in gold's rally. December silver futures moved up 30.4 cents, or 2.2%, at $13.87 an ounce, January platinum rose $26.60 to $1,179 an ounce and December palladium added $3.70 to $326 an ounce. December copper rose 4.1 cents to $3.169 a pound.
On the supply side, silver was down 218,406 troy ounces at 108.2 million troy ounces as of late Wednesday, according to Nymex data.
Data on gold and copper weren't updated, but as of late Tuesday, gold was unchanged at 7.49 million troy ounces and copper stockpiles were up 1,080 short tons to stand at 30,864 short tons.
Shares of metals-mining companies headed higher amid strength in metals futures.