NEW YORK, Dec 15 (Reuters) – Gold futures rose Wednesday morning after previous fund selling petered out, as the dollar fell on data showing net inflows into U.S. assets were not enough to offset October’s wide current account deficit, traders said.
By 10:59 a.m. EST (1559 GMT), February futures were up $5.10 at $442.40 an ounce at the New York Mercantile Exchange’s COMEX division, near the top of a session range from $436.70 to $443, its highest level since last Thursday.
Gold, which has the characteristics of a currency as well as a commodity, tends to move in opposition to the dollar as traders use it as an alternative to the greenback.
“It’s following the euro/dollar — that’s the whole story,” a gold trader at a large bank said. “And, there hasn’t been this huge liquidation in gold at the end of the year that we expected, with people taking profits.”
A previously higher dollar reversed course after Tuesday’s less hawkish than expected comments on interest rates by the Federal Reserve, which acted to halt several days of speculative liquidation in gold, dealers said.
The Fed on Tuesday’s made a widely expected quarter percentage point hike in U.S. interest rates.
The euro on Wednesday jumped to $1.3423 by midmorning, from $1.3390 prior to the inflows report and sharply higher from Tuesday’s late levels in New York.
Net inflows of capital totaled $48.1 billion in October, below expectations and short of the approximately $60 billion per month needed to post against the current account deficit.
At a Reuters/Lipper Investment Outlook Summit on Wednesday, mutual fund manager Frank Holmes, who as chief executive of U.S. Global Investors Inc. , said action in gold will continue to relate to the dollar in the short-term.
But over the long run, gold will move higher as investors will increasingly look to gold as an asset class to include in portfolios, he said.
Traders viewed gold as stuck in a broad range from $435 to $445, as the market seemed to move into holiday mode this week and turnover became relatively light.
Volume was around 16,000 contracts at 10:00 a.m.
February futures hit a 16-year high at $458.70 on Dec. 2, before easing last Friday to a one-month low at $432.90.
Spot gold traded to $440.15/0.90, against Tuesday’s New York close at $435.25/6.00. Wednesday’s late London fix was at $439.
March silver jumped 18 cents to $6.935 an ounce, near the top of a $6.735-$6.945 session range and up from last week’s 10-week low at $6.62. Spot reached $6.87/91 from $6.70/74 late Tuesday. Wednesday’s fix was at $6.78.
January platinum rose $9.60 to $840 an ounce. Spot platinum advanced to $838/842.
March palladium eased 40 cents to $186, after rising from a low at $184.60, the weakest price on the weekly spot charts since October 2003. Spot touched $181/185.
Source: Asia News Yahoo