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Gold, Silver Start The Week With Strong Momentum

By Neils Christensen of Kitco News
Sunday October 12, 2014 8:25 AM

(Kitco News) - Gold prices are starting the week on a strong note on the back of a weaker U.S. dollar; however, analysts say they are continuing to keep an eye on last week’s lows.

Electronic trading of Comex December gold futures opened the Sunday North American evening/Monday Asian session at $1,224.80 an ounce, up from Friday's pit close of $1,221.70 an ounce. However, strong buying momentum after the open propelled gold prices higher by more than $6 and so far the yellow metal has managed to hold on to its gains. As of 8:15 p.m. EDT, December gold futures were at $1,231.10 an ounce.

Electronic trading of Comex December silver futures opened Sunday evening/Monday morning at $17.360 an ounce, up from Friday's pit close of $17.303an ounce. Silver prices spiked higher at the open hit a high of $17.680 in the first five minutes of the open. Although prices are down from the session high, they have been trending up and are trading at $17.505 as of 8:17 p.m. EDT.

Eamonn Sheridan, currency strategist at Forexlive.com, said that although the gold market has managed to find new momentum since testing the December low just one week ago, but he is not convinced that the rally will last as the fundamental picture continues to favor the U.S. dollar.

Sheridan added that he still likes to sell rallies in the gold market.

“We are a good way from $1,180 and gold probably has a little more legs to run to $1,250 but yeah I like to sell rallies,” he said.

Sheridan said that he thinks last week’s selloff in the U.S. dollar, following more-dovish-than-expected minutes of the September Federal Open Market Committee meeting, was the result of position and not a shift in the fundamental outlook.

“I think you still have to expect that rate hikes are coming,” he said. “The minutes show that they might have been put off for a few extra months and markets are just re-pricing. I’m just not sold on a weaker U.S. dollar.”

Sheridan added that the European economy continues to teeter on the edge of a recession and the fundamental picture is to still sell the euro, which would lead to a stronger U.S. dollar and weaker gold prices.

Although the gold market still has some challenges to face, analysts at HSBC noted that they have seen a pickup in demand from Asian markets, which will be key to the market’s recovery.

“Bullion’s premium on the Shanghai Gold Exchange, a gauge on Chinese physical demand, stood at $4/oz and indicated greater interest from the Far East,” they wrote in Friday’s research report.

The analysts also noted that outflows from gold-backed exchange-traded funds continue to be a drag on the market. According to data collected by Bloomberg, they said that global ETFs are down 630,000 ounces since the start of the month.

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By Neils Christensen of Kitco News; nchristensen@kitco.com



Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.
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