Gold Edges Toward Another Record High

By Rhiannon Hoyle
Wall Street Journal
October 1, 2010

The price of spot gold stood just below its recent record Friday, but analysts warned that the market may be in need of a short-term pullback.

In a daily technical note, Barclays Capital analysts said Thursday’s selloff, which briefly sent the yellow metal down to $1,296 a troy ounce, was “consistent with the nagging overbought signals that we have been ignoring for so long.”

“However, a period of consolidation at higher levels can only be a good thing for the ongoing uptrend,” its analysts said.

Spot gold recently traded at $1,314.70, up $5.20, or 0.4%, and off its record of $1,316.25 an ounce.

UBS analyst Edel Tully said Thursday’s pullback highlighted “the nervousness in precious metals right now,” and acknowledged there may be some seasonal downside pressure on the complex this month.

“October typically offers up negative returns for both metals, with gold losing 0.5% on average and silver dropping 1.1%,” she said.

She said she expects that this time, silver will be the most likely to follow the typical October seasonality pattern, “while gold has room to move higher still.”

Spot silver traded at $21.92 an ounce, up 18 cents, or 0.8%.

The platinum group metals are also benefiting from a rally across the base metals amid a stronger euro and robust Chinese manufacturing data. Spot platinum traded up 162% at $1,677 an ounce. Spot palladium gained 1.6% to $572 an ounce.

Meanwhile, the International Monetary Fund has announced it sold 18.5 metric tons of gold on open market in August, taking the IMF’s on-market sales since the start of its program a year ago to a total 106.8 tons.

Off-market, the IMF has also sold 222 metric tons of gold to central banks in India, Sri Lanka, Bangladesh and Mauritius. The lender announced last September it would sell 403.3 tons of gold to increase its lending resources.