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Home / Futures Blog / Slight gains for gold as dollar endures underwhelming economic data

Slight gains for gold as dollar endures underwhelming economic data

April 27, 2012 by Daniels Trading

Gold futures gained mildly on Friday as the yellowish metal established its highest price in roughly two weeks of trading, according to Dow Jones Newswires.

The value of the world's reserve currency was dropping and benefited the price of gold.  Losses to the U.S. dollar were linked with underwhelming economic data.

Gross domestic product in the U.S. during the first quarter of the year developed at a pace of 2.2 percent, according to the U.S. Department of Commerce. A poll of economists administered by the news service indicated GDP growth would be at 2.6 percent for the first quarter.

In turn, that pushed up the price of gold, which benefits since it serves as an alternative investment and storage for wealth. Furthering the dollar's weakness is speculation that the U.S. government will take steps to spur the globe's largest economy via measures such as monetary easing.

The price of gold typically climbs amidst conjecture that the government will intervene for the sake of the economy.

"The idea that there will be another round of securities purchases, quantitative easing or an extension of operation twist will be somewhat bullish for gold," market analyst Sterling Smith with Country Hedging told the news source.

At 3:51 p.m. on Friday, gold futures gained 0.19 percent, a $3.20 lift to $1,663.70 per troy ounce.

MarketWatch reports the fourth quarter of last year saw the economy develop at a pace of 3 percent.

The news source noted concerns manifesting again about the sovereign debt crisis in the euro zone as a rating service downgraded the credit rating of a nation facing challenges presented by the debt scourge.

The credit rating of Spain, host of the euro zone's fourth-largest economic system, was slashed two levels by Standard & Poor's.

S&P also noted the government of Spain is likely to step forward and offer economic and fiscal support to the nation's banks, which the sovereign debt crisis has targeted.

Reuters reports one analyst viewed additional troubles in the euro zone as being beneficial to the yellowish metal, so long as the embattled euro continues enduring the pinch of the debt scourge.

"The euro/dollar has held above $1.30 for some time, in the $1.30-$1.32 range, which coincides with gold also being caught in a range," analyst Robin Bhar with Societe Generale told the news source. "If the euro zone crisis deepens and we see the euro/dollar correct below $1.30, that could give a bit of a lift to gold."

The news source noted demand for bullion from India, which until earlier this year was the globe's top consumer of the yellowish metal before ceding the title to China, has been weaker than anticipated, particular during a holiday.

Bloomberg reports half of the 28 analysts it polled anticipate the price of gold will increase next week.

The news source noted three nations – Mexico, Russia and Turkey – increased their holdings of the yellowish metal by 44.8 metric tons during the month of March.

Ben Bernanke, chief of the U.S. Federal Reserve, said earlier this week that the institution he leads is set to act should the economy require additional stimulus, according to Bloomberg. The Bank of Japan implemented another step of its economic stimulus action, acquiring the equivalent of $124 billion in Japanese yen of debt.

"Ultra-loose monetary policies of recent years don't look like they're going to end any time soon," executive director Mark O'Byrne with brokerage GoldCore of Ireland told the news source. "The problems in the euro zone don't look like they're going to end any time soon. We've had a dip, and our advice to clients is always to buy the dip."

Risk Disclosure

This material is conveyed as a solicitation for entering into a derivatives transaction.

This material has been prepared by a Daniels Trading broker who provides research market commentary and trade recommendations as part of his or her solicitation for accounts and solicitation for trades; however, Daniels Trading does not maintain a research department as defined in CFTC Rule 1.71. Daniels Trading, its principals, brokers and employees may trade in derivatives for their own accounts or for the accounts of others. Due to various factors (such as risk tolerance, margin requirements, trading objectives, short term vs. long term strategies, technical vs. fundamental market analysis, and other factors) such trading may result in the initiation or liquidation of positions that are different from or contrary to the opinions and recommendations contained therein.

Past performance is not necessarily indicative of future performance. The risk of loss in trading futures contracts or commodity options can be substantial, and therefore investors should understand the risks involved in taking leveraged positions and must assume responsibility for the risks associated with such investments and for their results.

Trade recommendations and profit/loss calculations may not include commissions and fees. Please consult your broker for details based on your trading arrangement and commission setup.

You should carefully consider whether such trading is suitable for you in light of your circumstances and financial resources. You should read the "risk disclosure" webpage accessed at www.DanielsTrading.com at the bottom of the homepage. Daniels Trading is not affiliated with nor does it endorse any third-party trading system, newsletter or other similar service. Daniels Trading does not guarantee or verify any performance claims made by such systems or service.

Filed Under: Archived News

About Daniels Trading

Daniels Trading is an independent futures brokerage firm located in the heart of Chicago’s financial district. Established by renowned commodity trader Andy Daniels in 1995, Daniels Trading is built on a culture of trust committed to the firm’s mission of Independence, Objectivity and Reliability.

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Risk Disclosure

This material is conveyed as a solicitation for entering into a derivatives transaction.

This material has been prepared by a Daniels Trading broker who provides research market commentary and trade recommendations as part of his or her solicitation for accounts and solicitation for trades; however, Daniels Trading does not maintain a research department as defined in CFTC Rule 1.71. Daniels Trading, its principals, brokers and employees may trade in derivatives for their own accounts or for the accounts of others. Due to various factors (such as risk tolerance, margin requirements, trading objectives, short term vs. long term strategies, technical vs. fundamental market analysis, and other factors) such trading may result in the initiation or liquidation of positions that are different from or contrary to the opinions and recommendations contained therein.

Past performance is not necessarily indicative of future performance. The risk of loss in trading futures contracts or commodity options can be substantial, and therefore investors should understand the risks involved in taking leveraged positions and must assume responsibility for the risks associated with such investments and for their results.

Trade recommendations and profit/loss calculations may not include commissions and fees. Please consult your broker for details based on your trading arrangement and commission setup.

You should carefully consider whether such trading is suitable for you in light of your circumstances and financial resources. You should read the "risk disclosure" webpage accessed at www.DanielsTrading.com at the bottom of the homepage. Daniels Trading is not affiliated with nor does it endorse any third-party trading system, newsletter or other similar service. Daniels Trading does not guarantee or verify any performance claims made by such systems or service.

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