Gold Set To Close The Year At $1200

Gold surprised traders on Tuesday sending gold at one point to trade over the 1220 range as “Grexit” sent a many traders running for safety, while others were selling off equities to book profits and moving to gold for safety ahead of the holiday. Gold is holding on Wednesday morning just above the $1200 level as markets move into the holiday. It is expected the gold will close the year just at or below the $1200 price. Gold rebounded from the biggest decline in a week as a retreat in stocks revived demand for an alternative investment. Silver advanced. Stocks fell around the world on Tuesday, led by energy producers as oil dropped for a fourth day. The US dollar fell for the first time in three sessions. Gold futures trading was 19 percent below the 100-day average for this time of day, data compiled by Bloomberg show. Silver is trading at 16.252 while platinum is flat at 1218.05

On Monday, a third and final round of a Greek parliamentary vote failed to elect a new president, triggering a snap election to be held January 25. That could strengthen the nation’s anti-austerity parties and deal a blow to Greece’s international bailout program. The renewed fears are good news for gold, which some believe outperforms other assets during times of political and economic uncertainty.

Also helping the metal was a drop in the US dollar. Gold is denominated in the US currency and becomes less expensive for foreign buyers when the US currency declines. The trend in gold has been negative this year, with prices down 14 per cent from their highs as traders sold the metal in anticipation of higher US interest rates next year-an environment in which investors tend to prefer yield-bearing assets over gold.

Industrial metals did not fare as well, trading on a weak note, but the slight climb in the HSBC manufacturing PMI gave the metals a bit of a bump. Copper is trading at 2.853 climbing off its lows near 2.82 earlier this week. London copper edged lower on Tuesday, falling for a fifth consecutive session to trade around its lowest in four-and-a-half years on worries about slowing demand in top consumer China. Three-month copper on the London Metal Exchange fell 0.2 percent.

“The low price has more to do with people’s expectation on how Chinese demand is going to be in the coming year. Obviously, no one has strong confidence and tightening of liquidity in China has been causing some concern.”