Source: Marketwatch
San Francisco— Gold futures closed lower Thursday as a pullback in energy prices eased inflation fears and encouraged investors to lock in gains, but the contract still finished out the holiday-shortened week with a more than $7 gain.
At the same time, copper futures climbed for a fourth session in a row to reach a fresh record — ending more than 6% above last Friday's level.
For the moment, "gold should see a brief period of consolidation around $585 to $605 before clearing the $605 chart congestion and pushing on toward $625," said James Moore, an analyst at TheBullionDesk.com.
Gold for June delivery closed down $1.20 at $600.10 an ounce on the New York Mercantile Exchange, coming back from a low of $594 an ounce. It closed last Friday at $592.70.
Metals trading on the exchange will end at its normal time of 1:30 p.m. Eastern, but regular trading won't resume until Monday.
Gold has rallied in recent months on expectations of a slowdown in the U.S. economy, a weaker dollar and concerns about political developments in some of the world's trouble spots such as Iraq, and more recently Iran.
It also has become an attractive investment target for funds, keen to capture the returns made available by the broader commodities rally.
Crude futures also recovered from early lows hit amid a nearly eight-year high in U.S. crude-oil inventories.
"While there still remains a strong link between oil and gold prices, at this moment any market interpretation of high U.S. inventory levels is being overshadowed by the tense standoff with Iran," said Jon Nadler, an investment products analyst at bullion dealer Kitco.com.
"Many surveyed energy analysts feel that current supplies notwithstanding, the likelihood of $80, $90 or even $100 oil should not be completely discounted," he added.
"To call today's easing in gold prices as strictly oil-related (as opposed to a round of profit taking) or to assume that the Iranian factor has been shelved (far from it), and therefore to abandon one's gold positions would make for unpleasant surprises down the road."
Overall, Nadler said, "there will be no doubt about the inflationary implications of energy costs" and "if the ratios were to in fact continue to hold up as closely as people are trying to correlate them, then the $80 barrel of oil implies $700 gold, while $100 per barrel oil means a repeat of the $875 price in gold."
Bright outlook
Indeed, sentiment for metals remains bullish. Raymond James Canada became the latest brokerage to raise its metal price forecasts, lifting its 2006 gold-price estimate Thursday to $591 an ounce from $585.
"Given the relatively low inventory levels, we expect an elevated likelihood of materially higher prices rather than a lower correction," said analyst Tom Meyer.
"We believe the continued benefits of emerging economy demand growth, constrained supply, low inventory levels and room for industry consolidation have supported prices through 2005 and remain features in our forecast horizon through 2009," he added.
Copper gleams
Though trading in metals futures was mixed Thursday, copper made the biggest percentage move — touching all-time highs for the futures market.
Copper closed up 4.4 cents at $2.8155 a pound, after setting a fresh record of $2.819 a pound. The contract has gained 6.6% on the week.
"Metals are outpacing all other commodity groups, suggesting to us that their dominant driver is global production," analysts at Bridgewater Associates wrote in a research note Thursday.
"Industrial commodities that have less of a speculative nature are now leading the charge higher," the analysts said, pointing to zinc, nickel and copper.
Historically, changes in prices for these commodities largely have been driven by changes in demand, Bridgewater said. "This demand is largely driven by output, meaning that meal prices historically have been a reliable instant gauge of global production."
The analysts also said: "The current squeeze suggests an acceleration in global production that is just beginning to be reflected in economic stats."
May silver futures closed up 19.2 cents at $12.855 an ounce. It ended last week at $12.07.
July platinum lost $11.80 to $1,098 and June palladium was off 45 cents at $349.50 an ounce. Platinum closed last Friday at $1,077, while palladium ended at $3563.15.
On the supply side, copper inventories were down 455 short tons at 18,565 short tons late Wednesday, according to New York Mercantile Exchange data.
Gold supplies were unchanged at 7.57 million troy ounces, and silver supplies were up 630,728 troy ounces at 124.7 million troy ounces.
Metals indexes fall back
In equities, metals shares and indexes tracking the sector turned higher, finding strength from the gains in silver and copper as gold move
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