Gold Prices on the Rise – May 25th, 2010
Once again Gold prices are on the rise, as has been show by Tuesday’s price increase. Tensions betwen North and South Korea and worries about Europe sparked bullion buying. Deliveries of Gold for June rose $4, or 0.3%, to $1,198 an ounce on the Comex division of the New York Mercantile Exchange.
Gold prices are $45 below a record of $1,243.10 hit May 12. The pullback just provided "an excellent entry point" for buyers as uncertainty surrounding a potential sovereign debt crisis in Europe and the more recent concerns with the Koreas, said Richard Ross, a technical analyst with Auerbach Grayson in New York. If gold closes above $1,200-$1,210 in the next few days "we have clear air between $1,250 and a re-test of the previous record," he added.
"It’s renewed flight-to-quality buying," said Matt Zeman, a trader at LaSalle Futures Group in Chicago.
Gold is off $45 since its high on May 12 and the lower price is attracting the bargain hunters, he added.
"Gold is in one of the strongest technical positions among all asset classes amid all this current volatility,"
With increasing tensions on the Korean peninsula stock markets were sent rolling worldwide, with the Dow Jones Industrial Average/ quotes/comstock/10w!i:dji/delayed (DJIA 10,044, -22.82, -0.23%) falling below 10,000 for the first time since February.
Oil on the other hand lost nearly 2% and the geopolitical concerns spurred a flight to the dollar. North Korea’s Kim Jong-il has reportedly ordered the North Korean security agencies and the People’s Army which is made up of all civilians, to be made ready for possible combat. Political tensions between North and South Korea have risen since a team of international investigators concluded that Pyongyang was to blame for the deadly sinking of a South Korean naval warship in March.
The dollar index /quotes/comstock/11j!i:dxy0 (DXY 86.55, +0.34, +0.40%) , which stacks up the greenback against a basket of six currencies, rose 0.7% to 86.86.
Geopolitical tensions on "the Korean peninsula also have to be viewed with increasing alarm given how unpredictable and paranoid the North Koreans can be," MF Global analysts said in a report to clients on Tuesday.
Safe-haven buying "remains robust and supports interest in the metal, " analysts at Barclays Capital said in a note to clients Tuesday.
Coin sales have also been strong, as The U.S. Mint data report shows gold coin sales have reached 158,000 ounces
in May. This is a 100% increase over the previous years levels. Holdings in the SPDR Gold Trust /quotes/comstock/13*!gld/quotes/nls/gld (GLD 117.37, +0.02, +0.02%) , the largest exchange-traded fund backed
by gold, posted a new record level on Monday, according to information on its Web site. The fund holds 1,237 metric tons (1,363.55 short tons) of gold.
Bullion prices have fluctuated in early trading Tuesday and have edged higher after a report that was issued, showed a drop in U.S. home prices in March. The Standard & Poor’s Case-Shiller home price index fell 0.5% in March in 20 of the U.S.’s major cities. Prices were up 2.3% in the past year, however, the second consecutive gain.
Gold rose $17.90, or 1.5%, to end at $1,194 an ounce on Monday. During the weekend, CajaSur, a small savings bank
was seized by Spain. This is just one example of what euro-zone governments are and will most likely be
contending with as they try to head off a debt crisis. "Many people are worried that could have been the first shoe to drop," LaSalle’s Zeman said.
In other news, other metals turned lower on Tuesday, with palladium again getting trounced. Palladium and platinum,
alongside silver, are metals that are heavily used in industries. Palladium for June delivery retreated $23.15, or 5%, to $430.40 an ounce. Platinum for July delivery was off $42.60, or 2.8%, to $1,491.90 an ounce. Silver for July delivery lost 22 cents, or 1.2%, to $17.78 an ounce. Copper for June delivery declined 10 cents, or 3.3%, to $3.03 a pound.