Gold halfway back from rout, up over $30 an ounce

Gold futures jump more than 24% on Thursday driving by bargain hunting and prospects for easier monetary policies. Today's rally brought the metal back to 50% of the recent off. Evidence of economic slowing would likely prevent the U.S. Federal Reserve from signaling an early exit from quantitative easing, a policy that's been supportive for gold.

By Myra P. Saefong and Barbara Kollmeyer
April 25, 2013, 11:33 a.m. EDT
Market Watch

SAN FRANCISCO (MarketWatch) — Gold futures jumped more than 2% on Thursday, driven by bargain hunters and prospects for easier global monetary policies, to recoup about half of their recent losses.

Thursday’s rally has “brought gold back to 50% of the massive recent sell off,” said Phil Storer, director of trading at Dillion Gage Inc., adding that he expects the rally to run out between $1,455 and $1,485, though it could stretch out to $1,522.

Gold for June delivery GCM3 +2.43% pushed higher by $30.30, or 2.1%, to $1,454 an ounce on the Comex division of the New York Mercantile Exchange. Prices are set to close at their highest level in almost two weeks.

Silver was the biggest percentage gainer among the Comex metals. May silver SIK3 +5.16% rallied by $1.07, or 4.7%, to $23.91 an ounce.

Gold’s big rout had started in the second week of April.

“If you take the fall from $1,560 to $1,320, gold has indeed pared roughly 50% of it,” said Carsten Fritsch, analyst at Commerzbank, in emailed comments.

Futures prices closed at $1,564.90 on April 11, the day before a two-day selloff that sent prices down by more than $200 an ounce.

Commerzbank noted that sentiment in gold is being driven by rate speculation ahead of the European Central Bank meeting and prospects for ultra-loose U.S. monetary policy. That sentiment was also boosted by some weak data in the U.S. and Europe a day prior.

Gold futures on Wednesday rose $14.90, or 1.1%, after orders for U.S. durable goods came in worse than expected.

That followed reports that manufacturing activity slowed toward the end of the first quarter, reinforcing worries about sluggishness in the broader U.S. economy. On Tuesday, data showed that German private-sector activity likely shrank in April and on Wednesday, investors got a downbeat reading on German business confidence.

Lacking conviction

But does the current bounce in gold have staying power?

“It is a rebound after a very sharp drop. Not more than this,” said Fritsch. “I would be surprised to see gold rising back to the pre-selloff level anytime soon. The move higher lacks conviction, which is visible in outgoing ETF outflows.”

Storer said the market shouldn’t be surprised to see gold revisit the recent lows within the next 8 to 10 business days.

“There seems to be a pretty reliable tendency for that to happen in markets like this,” he said.

Further evidence of economic slowing would likely prevent the U.S. Federal Reserve from signaling an early exit from quantitative easing, a monetary policy that’s been supportive for gold, some analysts have said.

Data Thursday showed weekly jobless claims at the second lowest level of the year. Reports on first-quarter gross domestic product and consumer sentiment in April are slated for release Friday.

Gold prices have had a rough April, with a tumble of nearly 9% putting them in position for their worst monthly slide since at least December 2011. But analysts have said that global physical demand for gold is still strong.

Hedge fund manager John Paulson said in a discussion late Wednesday morning that investors should expected continued volatility in gold, according to someone who listened to the discussion, CNBC reported.

Albert Edwards, strategist at Societe Generale, reiterated his forecasts in a note Thursday of gold hitting $10,000, though he gave no specific time frame.

The strategist with a reputation for his bearish views also sees a 70% decline in the Standard & Poor’s 500 SPX +0.70% . Edwards said holding gold is a “bet against central banks competency and given their track record that’s certainly a bet I’d be happy to still take.”

Among other metals traded on Comex, May copper futures HGK3 +2.49% on Thursday rose 9 cents, or 2.8%, to $3.25 a pound. Copper in the previous session gained 2.1%.

July platinum futures PLN3 +2.36% rose $25.60, or 1.8%, to $1,456.40 an ounce, while palladium for June delivery PAM3 +2.17% rose $13.85, or 2.1%, to $681.50 an ounce.

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