Futures Market News
Gold futures unlikely to crest $2k mark in August
Aug 30, 2011 07:34 AM
Gold futures were driving back toward the $1,800 per troy ounce threshold Tuesday morning, recovering from steep losses during the week prior that saw the precious metal lose roughly $200-worth in four days.
On Monday, August 22, gold futures notched record highs of $1,917.90 per troy ounce. By the end of the week, the precious metal plunged in value and was barely above the $1,700 per troy ounce threshold.
At 7:36 a.m. on Tuesday, August 30, gold futures gained 0.22 percent, a $3.90 rise to $1,795.50 per troy ounce.
Edel Tully, a UBS strategist, wrote a research note stating the rise in value as of late is unsurprising, according to Reuters. She stated that since the Friday, August 26 keynote speech by U.S. Federal Reserve chairman Ben Bernanke at the central bank's annual symposium in Jackson Hole, Wyoming, the Fed is biding its time.
While under intense scrutiny, Bernanke did not commit to additional monetary easing or additional strategies of spurring the slumping economy. As the second phase of quantitative easing was wrapping up in late June, a feverish speculation ensued about a potential third round of quantitative easing, more colloquially known as QE3.
Tully's note states that the lull between Bernanke's speech and the Fed's next move is beneficial for the precious metal.
"This is positive for gold, in our view," Tully's note states.
The Federal Open Market Committee, the policy-making arm of the U.S. Federal Reserve, is scheduled to meet next month. Bernanke said last Friday in Wyoming that the body will convene for two days - rather than just one. The FOMC will debate whether to employ a third round of quantitative easing to spur the economy, according to the UBS analyst.
"The market is likely to be volatile over the next few weeks, until there is clearer guidance from the Fed, which will likely come after the 2-day FOMC meeting in September," Tully's note states. "That the scheduled meeting has been extended for an extra day suggests that deliberations on potential policy actions will be comprehensive."
When gold futures notched the record highs of $1,917.90 per troy ounce on August 22, analysts, investors and additional industry insiders speculated when the precious metal would push beyond the $2,000 per troy ounce milestone. Many believed bullion was set to notch that figure by the end of August.
With the end of August coming Wednesday, gold futures are highly unlikely to surpass that milestone.
And after the steep losses during two days last week, the integrity of the yellowish metal has raised some eyebrows, according to Dow Jones Newswires.
"Some of gold's safe-haven attributes came into question last week when nearly $215 of value was shaved from its price per ounce" during a period of roughly 48 hours, states a note by Kitco Metals analyst Jon Nadler.
But, at the same time, when gold futures dove from the record price of $1,917.90 per troy ounce to just north of $1,700 per troy ounce, many investors were attracted anew, Dow Jones Newswires reports.
While some investors wondered if the all-time high drive was overdone, others capitalized on the opportunity to purchase the precious metal at the reduced price.
Large amounts of that purchasing came from Asia and the subcontinent, according to one of the largest asset management firms in the globe.
"Interestingly, the pullback has been met by physical buying out of India and China," BlackRock analysts told Dow Jones Newswires. "Prices are likely to remain volatile in the near term as investors' fears and uncertainties fluctuate."
Regarding Tuesday, the run-up to the final day of a memorable August, MarketWatch reports eyes will continue watching economic data and the U.S. Federal reserve for follow-up action to aid the economic recovery.
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