Gold reclaims $1,400; other metals move higher

March 16, 2011, 12:23 p.m. EDT

By Claudia Assis and Virginia Harrison, MarketWatch

SAN FRANCISCO (MarketWatch) — Gold futures gained Wednesday as Japan’s stock market improved and, closer to home, wholesale prices jumped and the U.S. housing market showed renewed signs of weakness.

Gold for April delivery (GCJ11 1,398, +4.90, +0.35%) gained $8, or 0.6%, to $1,400.80 an ounce on the Comex division of the New York Mercantile Exchange. It traded as high as $1,406.60 an ounce earlier.

Gold slightly trimmed its advance after U.S. and European stocks fell sharply, a move tied to reported comments by Guenther Oettinger, the European Union’s energy commissioner, about the situation at Japan’s crippled nuclear-power plant.

It proved short-lived, however, and markets showed signs of recovering as it become clearer that Oettinger didn’t have new information about the problems at the Fukushima Daiichi facility.

Earlier, gold had added to gains after the Commerce Department reported construction of new homes plunged 22.5% in February, erasing January’s gains and marking the largest single-month drop in housing starts since March 1984. Read more about U.S. housing starts and building permits dropping sharply in February.

Metals traders also took in data indicating higher producer prices, up a seasonally adjusted 1.6% for February as food costs registered their biggest one-month rise since 1974. See more about wholesale-level inflation running at a rate hotter than forecast.

May copper(HGK11 419.65, +5.95, +1.44%) bounced off nearly three-month lows, gaining 9 cents, or 2.1%, to $4.22 a pound.

Some support also came as Moody’s Investors Service downgraded Portugal’s debt two notches to A3, rekindling concerns about euro-zone sovereign debt. Read more on Moody’s latest European debt downgrade.

In Bahrain, security forces broke up anti-government protests, and at least three people had died after police opened fire on the demonstrators, according to reports. See more on unrest and protests in Bahrain.

Overnight, Asian markets rebounded off sharp declines prompted by the uncertainty over the nuclear crisis in Japan and the devastating earthquake and tsunami. See more on Nikkei benchmark’s rebound in Tokyo. Scrutiny for second reactor

The situation at the nuclear plant remained precarious and fast-changing, however. Authorities reported they feared a second reactor may have ruptured and may be releasing radiation.

In a measure of how worried about radiation Japanese authorities are, they canceled a plan to dump water from helicopters in an attempt to cool down overheating fuel rods. Read more about efforts to bring Fukushima Daiichi facility under control.

Rounding out the action in metals futures, silver tracked gold’s gain, while other precious metals overcame weak starts to also trade higher.

Silver for May delivery (SIK11 3,442, +30.30, +0.89%) advanced 52 cents, or 1.6%, to $34.65 an ounce.

Palladium for June delivery (PAM11 699.00, -5.90, -0.84%) added $10.70, or 1.5%, to trade at $715.60 an ounce. Sister metal platinum also gained ground, with the April contract (PLJ11 1,695, -10.20, -0.60%) up $20.20, or 1.2%, to $1,725 an ounce.

Claudia Assis is a San Francisco-based reporter for MarketWatch. Virginia Harrison is a MarketWatch reporter based in Sydney.

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