CBS Marketwatch: Gold tallies a nearly $8 weekly gain

Gold tallies a nearly $8 weekly gain

By Myra P. Saefong, CBS.MarketWatch.com
Last Update: 4:24 PM ET June 25, 2004


SAN FRANCISCO (CBS.MW) -- Gold futures posted a modest loss Friday but logged a gain of nearly $8 an ounce for the week.

Gold for August delivery closed at $403.20 an ounce, down 30 cents for the New York Mercantile Exchange session. It was up $7.50, or 1.9 percent, from last week's $395.70.

Thursday's gain was the reason for the weekly advance, with prices closing near $404 in racking up a 2 percent gain to end at its highest level since mid-April. See the latest futures prices.

"The market may have overreacted with [Thursday's] price gain -- it is overbought," said John Person, head analyst at Infinity Brokerage Services, adding that traders were more prone to "take money off the table" ahead of the Federal Reserve's expected decision next week to raise interest rates by a quarter-point.

Still, "buyers may come back in the market if [gold] demonstrates strength by forging to higher levels," he added. See more of comments.External factors may also lead to further gains. "Considering the geopolitical and economic backdrop, the short-term bias for gold is up," said Brien Lundin, editor of Gold Newsletter.

Dollar dictates

Friday's strength in the U.S. dollar, following sharp declines in the previous session, also helped ease investment demand for the precious metals. See Currencies.

The dollar's rebound came despite news that the U.S. economy grew at an annual rate of 3.9 percent in the first quarter, slower than the 4.4 percent growth rate previously estimated, according to the Commerce Department. The downward revision to GDP was unexpected. See full story.

Other metals futures also closed lower on Nymex. The July silver contract closed at $6.127 per ounce, down 4.8 cents. It still closed above the week-ago close of $5.982.

July copper shed 1.4 cents to close at $1.2095 per pound, modestly higher than the week-ago close of $1.1925.

September palladium fell $2.70 to end at $227.20 an ounce, while July platinum lost $6.50 to close at $806.50 an ounce. Both contracts closed below the levels they closed at a week ago.

Supplies of copper, silver and gold were lower as of late Wednesday, according to Nymex data.

Copper supplies were down 2,084 short tons at 103,256 short tons. Silver stocks were down 9,984 troy ounces at 117.7 million troy ounces. Gold inventories stood at 4.21 million troy ounces, down 182,818 troy ounces from the previous day.

A more recent update on supplies wasn't available on the exchange's Web site.

'Erratic' week to come

Traders are also wary ahead of the North Atlantic Treaty Organization summit that starts this weekend in Istanbul and continues into the coming week, said Frederic Panizzutti, a gold analyst at MKS Finance in Geneva.

"Istanbul was supposed to be at its highest threat level, but still terrors [acts are] possible," he said. "The situation is expected to remain critical over the coming few days, and it seems very likely that some further safe-heaven gold buying will be seen over the coming days," he said.

Given all that, "markets are expected to be very volatile and erratic next week," he warned.

Gold Newsletter's Lundin argued, however, that a correction in prices expected after the Fed's likely announced of a rate hike next week has already occurred.

"In fact, the market has at this point discounted more severe interest rate increases, and we are very likely to see a relief rally in gold upon the Fed's announcement," he said.

Mining shares little changed

Mining shares closed little changed Friday, but indexes ended the week with a gain.

"Whether it is next week, next month or early next year, the current price of gold and the current levels for mining and exploration stocks will be considered bargains," said Lundin.

A 1.7 percent retreat in shares of Apex Silver Mines (SIL: news, chart, profile) led the Philadelphia Gold and Silver Index ($XAU: news, chart, profile) lower by 0.1 percent to close at 88.44. For the week, it was up 2.9 percent.

The CBOE Gold Index ($GOX: news, chart, profile) rose slightly, adding 0.1 percent to close at 79.49. It was up 3.5 percent for the week. And the Amex Gold Bugs Index (HUI: news, chart, profile) closed at 194.25, up 0.2 percent for the session and up 2.6 percent for the week.

The indexes had closed out Thursday's action at their highest levels in at least two weeks.

Myra P. Saefong is a reporter for CBS.MarketWatch.com in San Francisco.