Gold prices benefit from Fed remarks

By Michael Bellart in Shanghai Source:Global Times Published: 2013-7-14 22:03:01

Domestic precious metal futures continued their rally last week as gold prices rebounded on international markets.

The most traded gold contract on the Shanghai Futures Exchange (SHFE) jumped 2.33 percent last week to close at 257.10 yuan ($41.88) per gram, or $1,302.58 per ounce. The SHFE most traded silver contract added 2.88 percent to close at 4,031 yuan per kilogram.

The August US gold future on Comex surged 5.3 percent to $1,277.60 per ounce last week, the contract's first positive week of the last five.

Gold prices benefited from a weakening US dollar and comments from US Federal Reserve Chairman Ben Bernanke last week, according to the commodity analysts from the Australian bank ANZ.

The international market saw Bernanke's responses during Wednesday's question and answer session as dovish, pushing down US treasury yields and the US dollar as a result. "The result was a sharp rally in gold," the analysts wrote Thursday, as bullion prices pushed beyond $1,280 per ounce.

The US Dollar Index, which measures the dollar against a basket of major global currencies, fell 1.78 percent last week to 82.94, down from a three-year high on July 5.

As of Friday, SHFE gold prices were down 24.45 percent for the year to date as gold funds have sold off significant holdings over the last few months.

"International investors are selling down gold positions as developed market economies recover and financial markets stabilize," the team from ANZ explained in a note Thursday. "The weight of selling from gold-backed exchange traded funds (ETFs) continues to act as a drag on the market."

The SPDR gold trust reported holdings down 15 tons as of July 8, taking holdings to a four-year low of 947 tons, ANZ analysts wrote Tuesday.



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