Gold rises for fourth straight day
NEW YORK – Gold prices rose Tuesday for the fourth day in a row to levels not seen since the early 1980s.December gold, or spot gold, soared as high as $511.20 an ounce before settling Tuesday at $510.20, up $1.30 from a day earlier on the New York Mercantile Exchange. Spot-gold prices have not risen that high since 1983.The recent surge in gold and other precious metals has been driven largely by fund buying, as interest grows in gold as monetary hedge.Also, gold was underpinned by an apparent lack of producer selling, coupled with recent buying interest by South American central banks.Sentiment remains bullish for gold, analysts said. As a result, an early profit-taking decline became a buying opportunity and the futures finished with a gain Tuesday. In doing so, the metal avoided what technicians consider to be a bearish chart-reversal formation.Meanwhile, the most-active February gold contract settled with a gain of $1.20 to $513.80. Earlier, the contract hit a fresh contract high of $514.80, then turned and fell as far as $507.70 before rallying again.”We tried to reverse to the downside and didn’t get all that far,” said Tim Evans, an analyst with IFR Pegasus. “So we bobbed back up. The market remains buoyant in terms of its sentiment.””That same demand that we’ve been seeing for weeks now continues to underpin prices,” said Dave Meger, senior metals analyst with Alaron Trading Corp. “So as of right now, pullbacks are still considered to be a buying opportunity.”The demand for gold in recent weeks appears to be broad-based – physical, investment and speculative, Meger said.Evans pointed out that that Canada-based Goldman Sachs analysts included buying gold as one of their top trading ideas for 2006.Below the $507.70 to $507.40 lows of the last two days, Evans put support for February gold at the 10-day moving average near $505, psychological support around $500, then the Dec. 1 low of $494.30.”These are the key nearby supports, where failure to limit a decline to somewhere in that range would possibly trigger heavier long liquidation,” he said.”In terms of market timing, it would not surprise me to see a cycle of profit taking between now and year end – both because we saw that last year, and also as a normal book-squaring kind of activity ahead of the holidays.”While gold has rallied sharply since September, Evans pointed out that the peak from December 2004 to Tuesday’s high in the nearby gold futures was roughly 12 percent.”That is better than a decline of 12 percent, but it’s not necessarily this outrageous risk-adjusted rate of return,” he said.