Gold futures piggybacked on the surging shared currency of the European Union on Friday as the yellowish metal was barreling toward its second consecutive week of gains on commodity markets, according to Reuters.
The policy-making arm of the U.S. Federal Reserve is preparing to convene next week to review the efficacy of its bond-buying program. The anticipation has prompted the U.S. dollar to lose value on foreign exchange markets, which benefits the precious metal since the two typically perform the inverse of one-another.
Precious metals have hung tough and demonstrated an enduring quality, which piques the interest of senior broker Kurt Pfafflin with Daniels Trading.
"Call me crazy, but I'm highly impressed by the strength and resilience gold and silver are showing today in the face of what has typically been the type of day I would expect to see gold smashed $50 to the downside," the senior broker stated in his column late last week.
QE to resume?
When the Federal Open Market Committee convenes for two days of meetings next week, all eyes will be on whether the policy makers will continue or cut the economy-stimulating measure of purchasing debt.
Should the FOMC approve more intervention, gold will continue climbing, one analyst said.
"The Fed said it is going to expand its balance sheet for a while, and for that reason inflation and inflation-related data are not a concern, whereas it is clearly a factor for gold that monetary easing in key markets continues," analyst Christin Tuxen with Danske Bank told the news source on Friday.
The meetings are set for Tuesday and Wednesday of next week.
The yellowish metal benefited from the upward drive of the 17-nation monetary unit on Friday.
On Thursday, the euro has slumped to its 90-day trough against the world's reserve currency.
As the euro bounces back, gold takes note, the analyst told Reuters.
"The strength in the gold price is also driven by the euro/dollar, which has been quite high throughout the day," Tuxen told the news source. "We see this rebound continuing in the short term, and this may reflect some near-term upside for gold."
Inflation incites increase
MarketWatch reports consumer prices shot up 0.7 percent during February, which pushed past forecasts. That proved to be a boon for gold futures' performance on Friday, according to one director.
"The inflation figure was higher than expected and given that inflation pressures are building, this likely accounts for gold's rise today," states a Friday email to MarketWatch from director Mark O'Byrne with GoldCore. "The market is also experiencing an element of 'dead-cat bounce' and gold is due a bounce higher from oversold levels."
The long-term prospects of gold are bright, the senior trader with Daniel's told the news source.
Central bank interest
A key reason why gold futures are a strong investment is the large amount purchased by worldwide central banks, Pfafflin said.
He noted the large-size purchases speaks volumes about the value of gold.
"By now, you should be well aware that a growing number of central banks are more than happy to take advantage of these "fire sale" prices," the senior trader stated in his column. "They're literally devouring physical bullion. In fact, last year they bought over 530 tons – that's the most gold purchased in nearly 50 years."
The record price for gold futures is $1,923.70 per troy ounce as established on September 7, 2011. The record price for silver futures is $50.35 as established in January 1980.
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 TRADING SYSTEM, NEWSLETTER OR OTHER SIMILAR SERVICE. DANIELS TRADING DOES NOT GUARANTEE OR VERIFY ANY PERFORMANCE CLAIMS MADE BY SUCH SYSTEMS OR SERVICE.
GLOBAL ASSET ADVISORS, LLC (“GAA”) (DBA: DANIELS TRADING, TOP THIRD AG MARKETING AND FUTURES ONLINE) IS AN INTRODUCING BROKER TO GAIN CAPITAL GROUP, LLC (GCG) A FUTURES COMMISSION MERCHANT AND RETAIL FOREIGN EXCHANGE DEALER. GAA AND GCG ARE WHOLLY OWNED SUBSIDIARIES OF STONEX GROUP INC. (NASDAQ:SNEX) THE ULTIMATE PARENT COMPANY.