Gold, silver rise, posting weekly gains

December 27, 2013

San Francisco (December 27)  Gold and silver futures settled higher Friday, logging gains for the week on light holiday trading, but the return of futures traders and positive economic data are expected to create headwinds for current prices.

Gold for February delivery  settled up $1.70, or 0.1%, at $1,214 an ounce on the New York Mercantile Exchange, for a 0.9% weekly gain, according to FactSet. Earlier in the day, the contract had traded as low as $1,208.50 an ounce.

Similarly, March silver gained 13 cents, or 0.7%, to settle at $20.05 an ounce, for a weekly gain of 3%. Earlier in the day, it touched a low of $19.75 an ounce.

Both gold and silver prices are being buffeted within a narrow trading range, because of lower investor demand as economic indicators improve and higher consumer demand on the perception of bargain prices, said James West, portfolio adviser to the Midas Letter Opportunity Fund, in emailed comments. “The return of futures traders from holidays next week will likely see prices under intensifying pressure in line with U.S. economic data,” said West, who expects new lows for gold below $1,100 in January.

It has been a brutal year for gold, with the metal down by around 28% since Jan. 1, while silver has dropped around 34% over the same period. Expectations the Federal Reserve would begin to scale back its stimulus program helped sink gold earlier this year, while a strong run by equities contributed to flows out of gold, analysts noted.

“As we begin 2014, headwinds will still present themselves with investors being bearish bonds and bullish stocks on raised growth expectations and the continued normalization of interest rates,” said Ole Hansen, head of commodity strategy at Saxo Bank, in a note.

“December will show a fourth month in a row of negative returns; momentum and trend following investors will not be changing their outlook or positioning unless we see a much stronger move to the upside,” Hansen said. “Traders will continue to favor selling into rallies until we see a potential break back above the December high” at $1,268 an ounce

In other metals trading, January platinum  rose $13.30, or 1%, to settle at $1,376 an ounce, while March palladium /quotes/zigman/13222141/realtime PAH4 +1.56%  added $11.20, or 1.6%, to settle at $711.95 an ounce.

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