The gold price rebounded resoundingly on Monday as a weaker dollar, the easing of Indian import restrictions and the downgrade of Japan’s sovereign credit rating all spurred on a comeback.
Gold for February delivery on the Comex division of the New York Mercantile Exchange closed up $42.60, or 3.6 percent, at $1,218.10 per ounce. Trade ranged from $1,141.70 to $1,221.00 in heavy volumes.
“Gold prices initially fell on the news the Swiss National Bank’s referendum on whether it should hold 20 percent of its reserves in gold had failed. However the decline was short-lived, with aggressive buying evident once the London session opened,” ANZ Research said in a note.
In a Sunday referendum, 77 percent of voters rejected the “Save our Swiss gold” initiative, which would have forced the Swiss National Bank to buy $60 billion of gold at current spot prices to raise its holdings to 20 percent from around 7-8 percent at present
Elsewhere, Moody’s Investors Service today downgraded the Government of Japan’s debt rating by one notch to A1, citing the rising uncertainty over whether the government’s medium-term deficit reduction goal is achievable and whether policy makers can overcome the tensions inherent in promoting growth while simultaneously stabilizing and reversing the rising debt trajectory.
Meanwhile, the Indian government late last week rescinded the so-called 80:20 rule that made it mandatory to export 20 percent of all imported bullion.
“Physical demand should continue to provide support on the downside and help the market find stability. But considering the sizeable inflows into India of late, we wouldn’t expect a sudden surge of buying in the near term simply due to the removal of restrictions,” UBS analyst Edel Tully said.
The reversal in gold was also mirrored by other commodities. Comex copper closed up 5.2 cents at $2.8980 per pound, while light sweet crude (WTI) oil futures climbed by 4.3 percent to $68.85 per barrel, which marks its biggest one-day gain since August 2012.
“Oil was important but not the sole driver of bullion’s rally. A modest push up in theeuro also helped support precious metals prices. Gold’s break over the psychological $1,200 level and the 50-day moving average of $1,204 came in relatively high volume as US market participants returned to the market following the Thanksgiving holiday,” HSBC analyst James Steel said.
“Can the rally continue? We believe much will depend in the near term on dollar and oil direction. The rally may have further to go near term but shorts exiting the market will provide only near term strength. The dollar still appears to be the favored currency and may provide greater headwinds for gold going forward. We expect bullion to stabilize and consolidate near term,” he added.
In the wider-markets, the dollar was softer at 1.2480 against the euro, while the Dow Jones industrial average and S&P 500 were down 0.14 percent and 0.55 percent respectively
As for the other precious metals, Comex silver for March delivery rose by $1.136 to $16.683 per ounce. Trade ranged from $14.155 to $16.810.
Platinum futures for January delivery on the Nymex ended up $30.30 at $1,241.60 per ounce, while the most-actively traded palladium contract closed at $808.10 an ounce, up $5.20.
Data today was mostly disappointing. China’s manufacturing PMI at 50.3 fell slightly short of forecast but ultimately was down on the previous month’s 50.8, while the HSBC PMI was in line with predictions at 50.0.
Here in the US, Markit reported that its final manufacturing PMI fell to 54.8 from October’s final reading of 55.9 and below the 55.0 forecast.
Additionally, the Institute for Supply Management said its index of purchasing managers fell to 58.7 last month from a reading of 59.0 in October and versus a predicted 57.9. ISM manufacturing prices fell sharply to 44.5, the lowest since July 2012.
The post Gold price whipsaws back above $1,200/oz as oil bounces appeared first on The Bullion Desk.
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