Spot gold pulls back as market watches for US inflation data
The spot price of gold dipped at the London opening on Friday, slipping $2 to $677 per ounce, but holding above yesterday's low at $673.60.
"The underlying factors are bullish," reckons Darren Heathcote at Investec Bank in Sydney.
"Oil prices are up and we have had a weaker US Dollar."
That weakness in the Dollar, however, only served to make gold cheaper for non-US investors.
Gold slipped 0.6% against Sterling from its overnight high, trading at £341 per ounce by 10:50am in London.
Versus the Euro, gold came within 70 cents of €500 per ounce – the key level it's dipped below only once in the last 7 sessions.
But with the Indian wedding season now drawing near – and the Akshaya Thrithiya festival next week – "there is an element of physical buying on the dips which is underpinning the market," reckons Heathcote.
On the data front, initial jobless claims in the US rose faster than expected last week according to numbers released yesterday.
US import and export prices both rose in March too, said the Bureau of Labor Statistics.
Today will see the latest Producer Price data released in Washington. Wall Street consensus forecasts a 0.7% rise, following a shock 1.3% rise in Feb.
Anything greater could push fresh investment Dollars into gold.
"The fear is that we're going to see continued pressure on prices," says Tim Rogers, chief economist at Brieing.com.
"The Fed's job is to lower inflation, and that simply hasn't happened yet."
(Click here to learn why the Fed's failure is bullish for gold...)
Elsewhere, pundits and newswires alike all point to yesterday's 3% rise in crude oil prices as supportive for gold.
WTI for May delivery broke $64 per barrel for the first time this week on news from the International Energy Agency that global stockpiles recorded their biggest first-quarter decline in more than a decade this year.
But gold investors would do well to note that the daily price correlation between crude oil and gold sank to precisely zero in the last 3 months.
And you really shouldn't believe everything you read on the newswires anyway – as the Gold Fields "takeover" scam proved earlier this week. (Click here for the full story...)
In the gold futures market, Tokyo contracts for delivery in Feb. '08 closed at the Tocom 0.9% higher for the week at the equivalent of $683 per ounce.
And in electronic trading in Asian, "the June delivery Comex contract has already breached the $680 target and will probably test $688 soon," says Rajini Panicker, head of commodities research at Man Financial in India.
"Oil and the Dollar will continue to support gold," he believes.
But it's the dynamics of supply-and-demand internal to the gold market that really look set to support the current bull market long-term.
South African gold production fell 8.8% year-on-year in Feb., said the statistical agency in Jo'berg yesterday.
Overall minerals production, however, was 4.4% higher year on year.
That suggests that the world's largest gold-producer is facing problems specific to gold production – problems faced by the global gold mining industry, in fact.