Spot gold touched a high of $946.90 in London — last seen in mid-June — up from $938.55 quoted late on Thursday in New York. The metal stood at $946.65 by 1134 GMT.

Global stocks rallied while the dollar fell against a basket of currencies, bolstered by a return to risk-seeking behaviour after remarks by the U.S. Federal Reserve convinced investors that borrowing costs would stay near zero and the debt-buyback programme would continue apace.

The weaker U.S. unit also made dollar-denominated gold cheaper for holders of foreign currencies.

The precious metal, viewed as a potential hedge against inflation, also got a boost from steady oil prices as supply concerns held crude above $70 a barrel.

Analysts said that gold was rallying on the weaker dollar and end-of-quarter deals, despite weak fundamental demand.

“From a fundamental perspective at least, $945 is a very good position for gold to be entering the second half of the year,” said Nick Moore, head of commodity strategy at RBS Global Banking and Markets.

RECOVERY PLAYS

Higher base metal prices, which have soared since the start of the year, could encourage investors to switch out of their holdings in gold to take advantage of higher demand for raw materials ahead of any economic recovery, analysts said.

“I’m concerned there will be more appetite for other things, and gold could get neglected if people want equities, energy and industrial metals,” said Robin Bhar, an analyst at Calyon.

“Next week is a new quarter, which could be associated with fresh investment flows into plays on the recovery,” he added.

Copper prices are up about 60 percent on the year, while aluminium used in transport and packaging is on track for its biggest monthly gain since May 1988.

Inflows into gold-backed exchange-traded funds waned, reflecting weak fundamental demand for gold from retail investors and the jewellery market.

Holdings at the world’s largest gold-backed exchange-traded fund, SPDR Gold Trust , fell 0.5 percent to 1,125.74 tonnes as of June 25, down 5.5 tonnes from the previous business day.

U.S. gold futures for August delivery strengthened to $946.8 an ounce, rising 0.8 percent on the day.

In other precious metals, spot silver firmed to $14.25, against $14.01 quoted late in New York on Wednesday, while platinum climbed to $1,199.00, against $1,186.00 and palladium strengthened to $243.50 from $242.00.

London, June 26 (Reuters)

Gold fell on Friday as investors sold assets after data showed a much larger-than-expected fall in U.S. November non-farm payrolls.

A sharp dip in the dollar in the immediate wake of the numbers initially sent gold higher, but it quickly gave up gains as the U.S. currency reversed direction.

The precious metal is often bought as an alternative investment to the dollar and tends to move in the opposite direction to it.

Spot gold was quoted at $752.30/754.30 an ounce at 1427 GMT, against $765.70 late in New York on Thursday, having earlier touched a low of $747.20.

“(The data) shows a worsening economic situation, and it is hard for assets to maintain value against that,” said John Meyer, an analyst at Fairfax investment bank.

U.S. non-farm payrolls fell by 533,000 in November, sending the unemployment rate to 6.7 percent, the highest since 1993. Analysts had predicted payrolls would fall by 340,000.

The other main external driver of gold, crude oil, also weighed on the precious metal, as prices dropped nearly 2 percent to below $43 an ounce.

Sharp falls in the crude price this week have sent oil down to a near four-year low. Weaker oil prices can undermine interest in commodities as an asset class, analysts say.

DEFLATION EYED

Interest in gold is being limited by expectations inflation will fall after sharp drops in the price of many raw materials such as crude oil and industrial metals.

Oil prices have shed more than $100 a barrel since they hit an all-time high of $147.27 an barrel in July, while prices of copper, aluminum and tin have also declined sharply.

“Mounting fears over the impact that a potential period of deflation may have on prices, appear to be weighing on sentiment,” said Standard Bank analyst Leon Westgate in a note.

Among other precious metals, silver fell along with gold, and was quoted at $9.22/9.30 an ounce against $9.46 late in New York on Thursday.

Platinum and palladium edged lower but remained rangebound as they consolidated after sharp price falls earlier in the week. Both metals have come under pressure from a spate of bad news from the global auto market.

China posted its third monthly fall in car sales this year in November, official data showed on Friday, setting the stage for a possible double-digit decline in 2009 despite government efforts to pump up consumer confidence.

General Motors said it is eliminating a third production shift at three U.S. plants, leading to almost 2,000 job losses, and will slow production of a range of cars.

Meanwhile BMW said its global sales fell by a quarter in November.

Spot platinum was quoted at $784/804 an ounce, down from $786.50 an ounce late on Thursday. Spot palladium was at $164.50/172.50 an ounce against $166.50.

Jan Harvey, Peter Blackburn
LONDON, Dec 5 (Reuters)

Overnight, gold has slipped slightly lower in the overseas markets.

Platinum fell below $2040 at the New York open, but caught fire from there, moving steadily higher until a slight easing during the Globex, and ending at $2105/oz., up $18. Overnight, platinum has fallen sharply.

Silver enjoyed a steeper rise than gold’s, leaping from a low of $16.70 at the open to nearly $17.30 at noon, before it too slipped in the afternoon hours to close at $17.13, up 34 cents. Overnight, silver has been flat to slightly lower.
(Click here for charts)

A lackluster day for gold was somewhat compensated for by the positive action in platinum and solid strength in silver.

Gold was supported by a falling dollar but undermined by a step back in the crude price juggernaut.

“Gold is watching while the dollar weakens … and is battling to find direction,” wrote Julian Phillips, of GoldForecaster.com, as he expressed disappointment that the market has not responded more strongly to recent record oil prices and to Monday’s skidding dollar.

Additionally, Phillips added, “We are headed into the quiet season for gold [May to the end of August] but at any moment, reports of another systemic fracture in the financial system could liven it up as happened last year when the sub-prime crisis emerged from the shadows.”

“Many of the factors that have supported the bull market for the precious metals remain in place,” say analysts from Natixis Commodity Markets Ltd.

“Inflationary pressures associated in part with the dramatic rise in commodity prices are continuing; uncertainty in the financial markets as the sub-prime crisis continues to unravel remains an issue … [and there is] increasing acceptance of commodities as an asset class,” they said.

Nevertheless, “these positive fundamentals do not necessarily justify a straight progression for precious metals prices,” the Natixis analysts said, adding that they expect prices for gold to average $875 in 2008.

Under that scenario, gold may already have peaked for the year. We doubt that.

Yesterday marked the first week in a while where the Energy Information Administration’s weekly numbers didn’t surprise to the downside.

The EIA reported that crude stockpiles rose by 2.4 million barrels for the week ending April 18, which was slight above analysts’ expectations for a 2 million barrel increase.

The EIA also reported that U.S. gasoline supplies fell by 3.2 million barrels, vs. expectations for a drawdown of 2.25 million barrels, while distillate stocks fell by 1.4 million barrels as against projections for a buildup of 250,000 barrels.

U.S. refineries really ramped up production, operating at 85.6% of capacity, more than 4% higher than the previous week’s 81.4%, the EIA reported.

Analysts went fishing for a sense of direction. “With little in terms of resistance ’signposts’ to guide us, we would need the market to define a top for us, presumably by moving to new highs followed by a same-day reversal to daily lows,” speculated Edward Meir, of MF Global.

Crude has hit a new all-time high of $112.21… corn rose to a record $6.16… and gasoline prices across the US hit another all time high.

In Virginia, the pump price of gasoline averaged $3.29 per gallon. The Americans might not like the rising price of gas, but frankly that’s tough: I do. It’s going to make us money.

I welcome high gasoline prices and their impact on crude price and reckon this trend has just started. Indeed, many analysts have been forecasting gas will hit $4 this summer for a while now: but the first prediction of $5 diesel hit the wires overnight too.

It wasn’t the fall in US gasoline stockpiles that was a surprise (especially not to us), it was the crude inventory figures that provided the real shock… but both were bullish for oil.

US crude oil stockpiles decreased by 3.148m barrels in the week ending 4 April. The consensus estimate of analysts was for a 2.5m increase. Gasoline inventories were expected to decline by 2.5m barrels but plunged by 3.442m. Distillate inventories declined 3.693m against expectations for a 1.5m slide.

All this is good news for the oil price because of the 3-2-1 rule… $120 a barrel here we come.

Continues below…

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Gold prices are likely to soar above $1,100 an ounce this year, after bottoming out in the high $800s, according to metals consultancy GFMS.

The group, which provides data to the World Gold Council, said that the factors supporting prices over the last few months would remain in place and investors would continue to look at bullion for strong returns.

It argued that “current knowns” could translate into prices pushing up over $1,100, but perhaps a few “future unknowns” might be required for levels over $1,200 or more.

Jeez, they sound like Donald Rumsfeld.

However, I fully concur with what GFMS are saying, which is something I have never really been able to say about the US’s 21st Secretary of Defense.

Regards,

Garry White

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PPS: I also write a newsletter each month called Smart Commodities UK which expands on the views expressed in Garry Writes and makes specific recommendations in the resource, infrastructure and biotech sectors. To discover more click here.