Source: MarketWatch
San Francisco— Gold futures closed unchanged Wednesday, taking a break from a three-session winning streak that's lifted the metal by almost $14 an ounce, as traders weighed economic and political uncertainty worldwide and a report of record gold demand in 2005.
Gold's "seeing good support," said commodities trader Kevin Kerr, citing "uncertainty of what hot spot may pop up next and cause investors to rush headlong into the yellow metal."
"This makes the short side of the market very nervous and as we see gold drop, we also see it turn and then move higher twice as fast," said Kerr, who also edits Global Resources Trader, a newsletter service of MarketWatch, publisher of this report.
And "with inflation starting to rear it head again in the U.S. economy, the prospect of further investment being drawn toward gold's safe-haven/anti-inflationary properties looks increasingly likely, leaving gold well placed for a test to $600 later in the year," said James Moore, an analyst at TheBullionDesk.com in London.
Gold for April delivery closed unchanged at $556.60 an ounce on the New York Mercantile Exchange, after falling as low as $549.80. The contract gained nearly $14 an ounce from Feb. 15 to Feb. 21.
Demand bounce
Providing support, a World Gold Council report showed that gold demand reached a record level of $53.6 billion in 2005, up from the prior year's $46.1 billion, with identifiable investment demand totaling 600 metric tons — up 26% from 2004.
All categories of the demand — jewelry, industrial and investment — "recorded double-digit year-on-year growth in dollar terms," according to the report, compiled by precious-metals consultancy GFMS Ltd. and released earlier Wednesday.
The fastest-growing identifiable investment demand category was exchange-traded funds and similar products, which grew 53% in tonnage terms and 67% in dollar terms, it said.
And 83% of the total 203 metric-ton demand for that category was accounted for by the World Gold Council-backed, streetTracks Gold Shares, the report said. The ETF ranked as 15th largest at the end of December, according to data from Morningstar Inc.
Underscoring this, assets in the streetTracks Gold Trust, the issuer of streetTracks Gold Shares, have now exceeded $6 billion, State Street Global Advisors said Tuesday.
The fourth quarter saw "substantial inflows of institutional investment into gold," the World Gold Council report said, with investment in ETFs up by 79 metric tons during that quarter alone. The report estimated that other institutional investment in the period approached 200 metric tons.
The rise in investment inflows had a "negative impact on jewelry demand and on retail investment due to profit taking," the report said. In the U.S, gold jewelry demand rose 1% in 2005 to 353 metric tons.
But overall fourth-quarter demand was "sufficiently strong to absorb a 10% year-on-year increase in supply and a 12% increase in the price," it said.
The year "2005 has been a momentous year for gold demand, with record levels of consumer demand in dollar terms and a simultaneous surge in institutional investment," said James Burton, chief executive of the World Gold Council.
So far, 2006 "has begun in a similar pattern to the end of 2005, with price volatility leading to strong demand for institutional investment in gold, but a cautious approach to jewelry purchasing," the report said. Read the full report.
Silver gains, but other metals dull
Most other Nymex metals futures fell Wednesday, with silver the exception.
March silver futures closed up 3 cents at $9.575 an ounce. April platinum closed down $4.10 at $1,030.40 an ounce and sister metal palladium saw its March contract fall $6.85 to finish at $287.15 an ounce. March copper eased 0.9 cent to close at $2.2645 a pound.
On the supply side, copper inventories were down 696 short tons to 31,857 short tons as of late Tuesday, according to Nymex data.
Gold stocks were down 3,215 troy ounces at 7.53 million troy ounces. Silver supplies were up 538,956 troy ounces at 126.8 million troy ounces.
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