| 03 September, 2010 Gold Finished Above $1250 Ahead of Friday’s Job Report The Day’s Story: Gold finished higher and above critical $1250 an ounce level as investors took positions ahead of Non-Farm Payroll report, forecast to show a worsening labor market, which could boost demand for safe-haven assets. Global equities rose for second day but rally was stalling due to upcoming Friday’s report which sharpened investors’ appetite for precious metal as Exchange-Traded funds increased their holdings. Global stocks continued to rise for second day although gains were limited despite flurry of improved but tepid economic data from U.S on Thursday which also capped gold’s gains. Pending sales of previously owned US homes rose unexpectedly by 5.2 per cent in July whereas market was expecting a decline. Among other data US jobless claims, factory orders and same-store sales also showed some improvement. Across Atlantic Gold was also finding some support from the European Central Bank, as President Jean-Claude Trichet said that its short-term lending facilities will continue until early next year. ECB also pointed out that while economic conditions remain uncertain; Eurozone economy is expected to grow at a modest rate of 1.4% to 1.8% in 2010. In other outside markets U.S dollar slid marginally lending some support to gold while Crude Oil enjoyed another day of sharp gains finishing above $75 a barrel. U.S dollar which enjoyed significant gains in last two weeks has started to give up those gains. Further weakness in greenback can lead to more gains in precious metal due to their inverse correlation relationship which has been erratic this year but appears to have resumed to some extent in recent weeks although we do see some days when both of them break their inverse correlation and move in the same direction especially when fears over economic uncertainty escalate. Gold prices have rallied 5.6% in August while the Dow Jones Industrial Average lost 4.3%, which makes the precious metal a prime target for investors looking to book profits. All eyes are on crucial Non-Farm payroll report due on Friday; figures are expected to be 123,000 in August down from 131,000 in July. The unemployment rate is forecast to come in at 9.6% from the July reading of 9.5%. We can see some active trading session soon after Friday’s report as worse than expected figures can trigger a rally in gold and we may see gold trading in uncharted territory in such a scenario. Gold price started its day with some gains and continued to move upwards throughout Asian session. Gold faced some indecisiveness during European session and price bounced between a tight range while holding on to minor gains. Gold made a strong move upwards by the time market in U.S started their trading day and broke above $1250 level for the first time during the day. Gold gains were limited as investors also moved their money into stocks due to improved risk tolerance. Gold finished its day with 0.5% gains at $1250.85 an ounce. Earlier gold peaked to its intraday high of $1253 an ounce. Coming Up: Non-Farm Payroll Report Today Other Metals: Silver futures for December delivery closed up 27.9 cents to $19.67 an ounce on Thursday. Platinum futures for October delivery rose by $15.80 to $1,551.50 an ounce on NYMEX. Palladium futures for December delivery rose by $5.15 to $525.25 an ounce. December N.Y. Copper closed up 200 points at $3.50 a pound on Thursday. Gold (News and Views):  December Comex gold closed up $5.30 at $1,253.40 an ounce on Thursday.
The London P.M. gold fixing was $1,248.50 on Thursday compared to its previous P.M fixing $1,246.50. The world’s largest gold exchange-traded fund, New York’s SPDR Gold Trust, said its holdings rose for the second day to 1304.03 tons up from 1302 tons on Wednesday September 01. The dollar index, which measures the U.S. currency against a basket of six major currencies, fell 0.1% to 82.44 on Thursday. Crude Oil for October delivery rose by $1.11 to settle at $75.02 on Thursday on New York Mercantile Exchange. Most gold experts would say investors should always have 3%-10% of a portfolio in gold as protection ranging from gold stocks to futures to ETFs to bullion. In order to reach that allocation, most experts would say to buy gold on dips. But the truth of the matter is, despite the fact that it's sexy headline news, the gold market is still very small and a lot of investors still don't own it. A common mistake investors tend to make is chasing the gold price. When prices rise double digits and the media talks about $1,300 gold, investors panic and rush in to buy the metal for fear of missing the boat. The same is true in the reverse. If gold falls double digits, many investors dump their positions because they don't want to be left owning "cheap" gold. Factors Affecting Gold Price Yesterday: "People are reluctant to do much of anything today except position for tomorrow," said John Canally, investment strategist and economist at LPL Financial in Boston. While encouraging data may limit gold's gains, analysts said economic worries will keep supporting a safe-haven bid. "We know we are weak and we are not coming out of this in a `V' shaped recovery. At best, we will have an `L'. Now the next question has to be, does it get worse than the `L' and turn lower?," said Howard Simons, strategist at Bianco Research. "Gold is continuing its slow and steady advance," said Frank Lesh, broker with FuturePath Trading. "There's still a need for safety, for something that will maintain its value in these uncertain times." That gold has moved upward in an orderly fashion makes the recent rally even more important, Lesh said. "We tend to hold value when we do that." "These days ... with nerves, greed, fear, and other such impact factors being at extremes, even modestly negative news can do the trick," of pushing gold higher, said Jon Nadler, senior analyst with Kitco Metals. "Every nuance of every little number is enough for exaggerated moves in this environment of 'unusual uncertainty.'" Gold Future Outlook: "Monthly ETF inflows turned positive in August; these need to accelerate for gold to overcome potential scrap supply at these prices and rise sustainably through $US1,250," Swiss bank UBS noted in a daily report. Most experts expect gold to trade in a tight range as prices wait for a catalyst. "There's a battle going on in the $1,250 area," says George Gero, vice president of global futures at RBC Capital Markets, "between the mining companies that sold the $1,250 calls and the funds that bought the $1,250 calls." “The markets are anticipating low rates for a protracted period and perhaps another round of quantitative easing and stimulus,” said Frank McGhee, the head dealer at Integrated Brokerage Services LLC in Chicago. “This will let the metals move up. The currencies can stay flat, and gold can still rally.” Investors should buy gold for “insurance” purposes, said Dennis Gartman, an economist and the editor of the Suffolk, Virginia-based Gartman Letter. “We’ve absolutely no interest at all in being short of gold.” Technical Analysis (By Jim Wyckoff): Technically, December gold futures bulls still have upside technical momentum have the solid technical advantage and are still poised to challenge the all-time high of $1,270.60, scored in June. Prices are in a five-week-old uptrend on the daily bar chart. Bulls' next near-term upside technical objective is to produce a close above solid chart resistance at the all-time high of $1,270.60. Bears' next near-term downside price objective is closing prices below solid technical support at this week's low of $1,233.50. First resistance is seen at this week's high of $1,256.60 and then at $1,259.00. Support is seen at $1,250.00 and then at Thursday's low of $1,245.30. Wyckoff's Market Rating: 7.5. Daily Gold and Silver Expected Range: Gold: US$1237- $1264 Silver: US$19.25 - $19.90 Prepared by: Bilal Afzal Market Analyst Success Bullion International (HK) Ltd
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