Gold Rally Loses Steam
Source: FXstreet (10/25/10)
". . .as positive housing data spurs dollar bounce back."
Gold futures for December delivery were recently up $12.20 at $1,337/oz. Despite the significant gain, the yellow metal has come well off of its intraday high of $1,349.50.
"The G20 said that they want to refrain from competitive devaluation of currencies but they didn't announce any concrete solutions or policies on how to go about doing that," a U.S.-based gold trader said. "I can sit here and say that I would like to be able to fly but unless I show you plans for a jetpack no one is going to believe me. That's how the currency markets are viewing the G20 meeting—totally dismissive," he added.
Without any clear directions from the G20, the dollar weakened during the early morning hours. The U.S. currency broke the 1.4000 level against the euro and tested a low of 1.4079.
"The likelihood that the G20 does not find a solution to growing global currency disputes leaves open the possibility that currency policy disagreements will escalate and thus support gold," said HSBC Senior VP and Metals Analyst Jim Steel. The recent correction in prices triggered a revival in physical bullion demand, he added.
"The revival in physical demand without the market even breaking $1,300 shows that physical buyers are not waiting for a major selloff before they accumulate bullion and that underlying gold demand, even in price sensitive economies, is strong," Steel said.