Gold futures made a strong comeback yesterday, as U.S. stocks took a precipitous drive and a similar drop in the U.S. dollar made gold, a low-risk asset, a safe heven for investors for the time being.
Gold for December delivery on the New York Mercantile Exchange increased by 2 percent, or $27.50, to close the day’s trading at $1,360.90 per ounce. This followed a brief period where gold prices dipped under $1,320. Stock prices, conversely, bifurcated in yesterday’s trading, same with Treasury bonds and the greenback; these three all took sharp dips yesterday, subsequently leading to haven demand for the precious metal.
Yesterday’s activity, in all, negated U.S. jobless claim statistics that exceeded analyst forecasts; the job report would have added weight to speculation of the Federal Reserve curtailing its economic stimulus initiative later in the year.
Also benefiting from haven demand were silver futures for September delivery, which ticked up by 5.2 percent, or $1.14, to $22.93 an ounce.
In a report in Gold Newsletter, editor Brien Lundin weighed in on the safe haven phenomenon, as well as other variables that had influenced market gyrations in previous days. “The deteriorating (political) situation in Egypt and the selloff in U.S. equities are undoubtedly having an effect,” posited Lundin. He added that any effects on the market are “being exacerbated by the extreme tightness in the physical gold market.”
He believes that if Western gold speculators would want to invest in the metal now, they will have to contend with consumers from China and other Asian markets “for every last ounce.”