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Home / Futures Blog / Gold futures rebound from string of losses

Gold futures rebound from string of losses

October 16, 2012 by Daniels Trading

Increased demand pushed up gold futures on Tuesday as the precious metal climbed from its lowest value in about one month, Bloomberg reports.

Also prompting the upward drive of the yellowish metal was the reduced value of the U.S. dollar, which lost value against its counterpart currencies. The dollar lost value as conjecture indicated debt-hobbled Spain might be preparing to request international bailout aid to help its struggling banking sector.

The Iberian nation might be heading toward a line of credit from the rescue fund established for the benefit of nations being victimized by the sovereign debt crisis. That proved to be beneficial to the shared currency of the European Union, which the precious metal typically tracks.

By contrast, bullion performs the inverse of the world's reserve currency.

"The dollar trading lower, and talk about Spain set to ask for a bailout is helping set the positive tone," states an email to Bloomberg penned by vice president Steve Scacalossi with TD Securities Inc. in New York.

At 11:08 a.m. on Tuesday, gold futures climbed 0.45 percent, a $7.90 lift to $1,745.50 per troy ounce.

Bouncing back
One day after losing 1.3 percent of its value, the precious metal was reaching higher.

Monday's loss marked bullion's steepest drop since early July.

"The gold market experienced momentum-based selling but appears to have found a base" at roughly $1,735 per troy ounce, states a report penned by analyst Mark Pervan with Australia & New Zealand Banking Group Ltd., according to Bloomberg.

By Monday, gold futures had gained roughly 11 percent on the year as the precious metal barrels toward a 12th consecutive year of annual gains.

Economic news supports gold
Investors were reeled back in by lower prices of gold, Reuters reports.

The likelihood of Spain seeking a bailout to aid its hobbled banking sector proved to be beneficial to the euro, which also capitalized on stronger data released by Germany and the U.S.

Bullion is benefiting from anticipations about central bank intervention keeping interest rates low while supporting inflation for long-term purposes.

September saw consumer prices increase in the U.S. while gas prices increased. But the third round of quantitative easing deployed by the U.S. Federal Reserve is unlikely to stop.

"Particularly for investors and central banks, the incentives to buy gold are still there. Quantitative easing, low interest rates, counterparty risk concerns, all these factors are in place, and investment interest is definitely there," analyst Tobias Merath with Credit Suisse told the news source. "The way we interpret the current episode is that we saw a meaningful test of $1,800, we didn't manage to break that and now we have retreated a little bit. People have taken a bit of profit, but we think this is a temporary story."

Extended losses
Monday's losses were largely linked with stronger retail sales data released by the U.S.

The dip also was influenced by economic data late last week about the labor market and consumer confidence.

"The open-ended nature of QE3 is only likely to see increased choppiness in gold, since many investors will be pulling out on fears that the Fed could reconsider its ultra-low interest rate guidance and monthly liquidity injections under the ongoing stimulus," states a note penned by VTB Capital, according to Reuters. "Temporary and, potentially, deeper pullbacks are to be expected, especially given slack physical activity and bullion's strong correlation to riskier assets."

MarketWatch reports slips in value on Monday continued from the Friday losses, which capped a week of dropping 1.2 percent.

That prompted the yellowish metal to fall to its lowest value since the middle of last month.

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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