Interesting ReadGold futures close near a three-week high
By Myra P. Saefong, MarketWatch
Last Update: 4:43 PM ET Jun 1, 2007
SAN FRANCISCO (MarketWatch) -- Gold futures climbed Friday, closing at their highest level in nearly three weeks to log a second-winning session in a row, as traders ignored strength in the U.S. dollar in the wake of a better-than-expected employment report to take advantage of the more than 3% loss in the metal's prices last month.
"The smart money is positioning itself for the next significant move up in gold ... in these long-term secular bull markets," said Mark O'Byrne, managing director of Gold and Silver Investments Ltd.
There has been a slowdown in purchases from smaller investors in the last three months and even a few sales, he said in e-mailed comments. But there is a "significant increase in high net-worth purchases."
'The smart money is positioning itself for the next significant move up in gold ... in these long-term secular bull markets.'
— Mark O'Byrne, Gold and Silver Investments Ltd.
"This suggests as is usually the case that the ... weak hands ... [have] been shaken out by the recent short-term corrections in March and May, and by the medium-term consolidation," he explained.
Gold for June delivery closed up $10.20 at $671.20 an ounce on the New York Mercantile Exchange. It climbed as high as $672, a level the contract hasn't seen since May 15 -- the day intraday prices tapped $675.
The contract scored a gain of $15.90, or 2.4%, for the week, but finished the month of May more than $22 lower.
The August contract trades on the highest volume. August gold closed up $10.20, or 1.5%, at $676.90 an ounce, also its strongest level since May 15.
"The tremendous drop in open interest on the Comex reported yesterday, after remaining at a very high level, strongly suggests someone or group took delivery of a large quantity of gold -- which is not only very bullish, but will cause the very large bearish camp to rethink their position," said Peter Grandich, editor of the Grandich Letter.
"A close above the $665 spot is another nail in the coffin for the shorts," he said in e-mailed comments.
Oversold?
Ned Schmidt, editor of the Value View Gold report, said he believes that gold has been "incredibly over sold."
"Some traders have always mistakenly assumed that central bankers would dump gold on the market," he said in e-mailed comments. But the U.K. has been the only government to do so, and that was almost a decade ago, he said.
"This week we learned that European central bankers would not be dumping gold on the market," he said.
"They own an immense quantity of gold. Pushing down the price only hurts them," and "their U.S. dollar holdings are losing value and their gold is appreciating," he said.
Meanwhile, in currencies trading, the dollar rose against other major rivals Friday, touching an almost four-month high vs. the yen. See Currencies. A government report showed the U.S. economy created more jobs last month than expected, reinforcing expectations that the Federal Reserve won't cut interest rates this year.
But gains in the dollar were limited as a separate report showed the year-over-year core personal consumption expenditure rate, the PCE, fell back to the Fed's target zone.
Other metals reflected gold's strength Friday, with silver making the biggest gains.
July silver closed at $13.74 an ounce, up 2%, or 27 cents, after gaining almost 2% in the previous session. The contract gained 5.7% for the week. July copper finished 0.95 cent higher at $3.405 a pound -- up 2.5% for the week.
September palladium added $4.20 to close at $377.45 an ounce, up more than $4 for the week, while July platinum tacked on $9.80 to end at $1,295.60 an ounce, up more than 1% from a week ago.
On the supply side, gold warehouse inventories were down 34,803 troy ounces at 7.63 million troy ounces as of late Thursday, according to Nymex data. Silver supplies were at 130.5 million troy ounces, down 1,016 troy ounces, while copper supplies fell by 691 short tons to stand at 27,500 short tons.