Gold Plays Rise as US Dollar Weakens

Andrew Klips  |

Gold for August delivery is trading up $22.20, or 1.6 percent, at $1,414 per ounce on Thursday as the US dollar softens on rising filings for jobless benefits and a modestly lower revision to gross domestic product for the first quarter. The close above the $1,400 level Thursday marked the highest closing price since May 14.

The less-than-expected economic data increased the likelihood that the U.S. Federal Reserve will continue with its massive monthly stimulus efforts, a hot topic that has been in debate recently, causing some volatility in the main indexes.

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The greenback is weakening against the euro by 0.8 percent to each $1.3045 buying 1 euro. The ICE Dollar Index, which measures the USD against a basket of six world counterparts, is down another 0.74 percent. On Wednesday, the index carved away 0.78 percent at 83.65 and with today’s losses is testing its lowest level since May 10.
Gold and the greenback typically trade inverse to each other as a weaker greenback makes commodities like gold that are priced in USD more attractive to users of foreign currencies. Gold is also viewed as a hedge against inflation, so money-printing activity of the Fed usually bolsters appetite for gold, although that mentality hasn’t necessarily held true in 2013.

Gold is on pace to put together its second consecutive weekly gain after rising 1.6 percent last week. For the month of May, however, it will take an impressive showing on Friday to erase the monthly losses, as gold ended April near $1,480 per ounce. At current levels, gold has fallen in 7 of the last 8 months (March being the only exception).

With the movement today, some deeply discounted bullion miners are reaping the benefits. Barrick Gold (ABX), the world’s biggest gold miner, is ahead by almost 6.75 percent at $21.15. Barrick is looking like it will log its second straight green week, which has ABX on track to post a monthly gain, its first of 2013.

Goldcorp, Inc. (GG) is up 5.44 percent at $29.25. Goldcorp is also on track for its second consecutive week of gains.

Kinross Gold (KGC) has risen 7.51 percent to $6.30. Kinross, with two green weeks, is pushing on its highest valuation since the second week in April.

Newmont Mining (NEM), the second largest gold producer in the world (and largest U.S.-based gold producer), is up 3.79 percent at $34.36. On Wednesday, Newmont reported a 36-percent drop in first-quarter profits as lower production and higher costs hit the miner. Newmont is also on track for two straight winning weeks, marking the first time that happened since the last weeks in March.

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