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Gold futures - Weekly outlook: January 23-27

Gold futures - Weekly outlook: January 23-27

January 23, 2012 / 08:09 AM IST
Forexpros - Gold futures rose on Friday, ending the week close to a five-week high as markets remained focused on talks between Greece and its bondholders on restructuring the country's debt.

On the Comex division of the New York Mercantile Exchange, gold futures for February delivery settled at USD1,666.75 a troy ounce by close of trade on Friday, rising 1.9% over the week, the third consecutive weekly gain.

Gold futures were likely to find short-term support at USD1,645.15 a troy ounce, Friday's low and resistance at USD1,681.55, the high of December 13.

On Friday, officials said Greece was nearing an agreement with creditors on a debt restructuring deal, aimed at erasing EUR100 billion of the country's EUR360 billion debt burden.

Markets have been paying close attention to Greek debt talks in recent sessions as the debt-laden country needs to secure an agreement with its bondholders in order to secure new bailout funds and avert a default when a EUR14.4 billion bond redemption comes due on March 20.

On Thursday, gold prices rallied to USD1,670.45 a troy ounce, the highest since mid-December after auctions of Spanish and French government encountered solid investor demand, easing concerns that borrowing costs for euro zone countries would rise, after ratings downgrades on the countries by Standard & Poor's earlier in the month.

However, prices surrendered gains following the release of tame U.S. inflation data and a report showing that U.S. jobless claims fell to an almost four-year low.

Strong physical demand in China and across most parts of Asia help underline prices, as consumers made last-minute purchases before the Lunar New Year break which starts this week.

Buying interest in gold and other precious metals could be dented next week as Chinese buying slows for the weeklong holiday.

On Friday, London-based industry group GFMS Limited said that gold prices were likely to struggle in the short term, particularly once Lunar New Year demand ebbs.

GFMS expected gold prices to average USD1,640 an ounce in the first half of 2012, before prices pick up 'and power ahead to fresh all time highs' above USD2000 later in the year.

The group cited exceptionally low interest rates, inflation concerns, potential for monetary policy easing, and 'a general mistrust of fiat currencies.'

The report added that the euro zone's debt crisis has pushed some investors to the U.S. dollar and Treasurys as 'a least bad option,' but the reemergence of any talks regarding additional quantitative-easing measures, 'could really fire up the gold market.'

Elsewhere on the Comex, silver for March delivery settled at a six-week high of USD32.16 a troy ounce by close of trade on Friday, surging 7.4% on the week, while copper for March delivery settled at USD3.746 a pound, climbing 3.79% over the week.

Silver futures rallied nearly 5.5% on Friday after prices rose above their 50-day moving average of USD30.88 a troy ounce, triggering fresh buy orders and sparking a wave of short-covering.

Adding to the bullish sentiment on the metal, sales of silver coins by the U.S. mint in January are already 50% above the average monthly sales figures in 2011, a reflection of investor demand for precious metals as an alternative asset.

In the coming week, investors will be eyeing developments in the euro zone, with finance ministers from the single currency bloc meeting in Brussels on Monday, with Greece's debt restructuring deal likely to be at the top of the agenda.

Markets will also be closely watching the outcome of Thursday's Federal Reserve policy setting meeting, as well as Friday's preliminary data on U.S. fourth-quarter gross domestic product.

Forexpros - Forexpros offers an extensive set of professional tools for the Forex, Commodities, Futures and the Stock Market including real-time data streaming, a comprehensive economic calendar, as well as financial news and technical & fundamental analysis by in-house experts.
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first published: Jan 22, 2012 04:44 pm

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