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Fundamental Precious Metals
Written by article default Monday, 30 May 2011 09:22
Gold rallies on uncertainties and weak dollar
Gold continues to trend strongly higher on Friday to recovery the previous day’s losses and heading to a strong second consecutive weekly gain. The precious metal’s appeal was bolstered by the weak dollar and subdued inflation this time which signals extended dollar floods in money markets on the loose Feds monetary policy.
Gold is currently trading bullishly at $1533.67 after recording the intraday high of $1535.10 and rising from the low of $1518.25 per ounce.
The metal continued the upside rally in London as the metal rose to $1525.00 in the morning fixing from yesterday’s evening fixing of $1518.50;
Surely the metal was supported by the fragile sentiment and data accompanied by the dollar weakness. The income report from the United States was not that upbeat with spending lower than expected at 0.4% while core PCE inflation rose a mere 1.0%.
One would think that the low inflation in the United States would pressure gold, yet in this case the Feds focus on core inflation only undermines the real rise in costs on Americans and implies negative interest rates. Also that translates into steady loose monetary policy and accordingly more dollar floods and the need for gold as a store of value for the dwindling dollar.
The dollar continued to slump versus major trading partners as the dollar index fell to the low of 74.90 and rebounded to still trade now bearishly around 75.16 from the high of 75.95.
Surely one would believe that the market sentiment has recovered, yet it is simple haven demand the most of it that is bolstering gold’s gains. The simplest clue to prevailing haven demand is the franc’s rally to new records high versus the dollar and the euro on the prevailing uncertainty which was further supported by the steady leading indicators in May near the highest in five year.
We can see the metal is back with its appeal as a haven in markets and recovered from the recent setback and degraded value as a base metal. More fluctuations might be seen but gold is still bullish for now!