7 January 2009

Faint praise for Gold ~ it rose the least since 2004 but sell rallies

Fron todays SMH, quoted in full......

"Gold rose, erasing earlier losses, on speculation that the dollar's rally will stall, boosting the appeal of the precious metal as an alternative investment.

The dollar climbed as much as 1.7% against a weighted basket of six major currencies before paring gains. Gold, which generally moves in the opposite direction of the currency, last year rose the least since 2004 as the dollar advanced for the first time since 2005.

Gold turned when the dollar started to weaken, said Frank McGhee, the head dealer at Integrated Brokerage Services LLC in Chicago. The additional amount of money thats sloshing around the financial system will weaken the dollar.

Gold futures for February delivery rose $US8.20, or 1%, to $US866 an ounce on the New York Mercantile Exchanges Comex division, after earlier touching $US838.80, the lowest in more than a week. The metal rose 5.5% in 2008.

Silver futures for March delivery rose 17.5 cents, or 1.5%, to $US11.445 an ounce. The metal fell 24% last year.

The US government has pledged more than $US8.5 trillion as of Nov. 25 to bail out financial companies and help the country recover from a recession. A Democratic aide said President-elect Barack Obama favors a $US775 billion stimulus package to revive the economy.

Golds gains accelerated after testing the 200-day moving average and rebounding, a bullish signal to some traders who look at historical price charts.

Gold touched the 200-day moving average and didnt fall apart, McGhee said.

Sell on Rallies

Still, gold should be sold into rallies, some analysts said. Societe Generale predicted gold will average $US650 an ounce this year. Gold futures averaged about $US874 last year.

Deleveraging in the first half of this year will keep gold under some pressure and rallies may be false dawns, analysts at Societe Generale said today in a report.

Some investors bought platinum on speculation that government bailouts of US automakers and proposed tax cuts for consumers will revive demand for cars. US car and light truck sales plunged 36% last month, capping the worst year since 1992.

Silver, platinum, and palladium, which all have wider industrial applications than gold, had annual declines last year.

About 60% of platinum is used in pollution-control parts for car and truck engines. The metal tumbled 38% last year while palladium lost 50%.

Platinum futures for April delivery rose $US10.60, or 1.1%, to $US968.20 an ounce on Nymex. Palladium futures for March delivery gained $US14.10, or 7.6%, to $US199.05 an ounce."

No comments: