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| Commodity Gold |
They sent commodity gold to a record high and silver to 31-year highs Wednesday.
“All of these factors do not look like a short-term event,” said George Gero, vice president with RBC Capital Markets Global Futures. “These, coupled with the fact that most commodities are at highs—(such as) cotton, coffee, sugar and grains—is very inflationary. If you eat, if you drive and you wear clothes, you are going to feel inflation.”
As of 11:23 a.m. EST, most-active April gold was up $7.50 to $1,438.70 an ounce on the Comex division of the New York Mercantile Exchange and peaked at $1,439.60. May silver was up 40.3 cents to $34.83 and has been as high as $34.89.
Gero said support is coming from what he terms a rising “MET index,” as in Middle East trauma.
The biggest flashpoint at the moment is Libya. Aircraft bombed a section of eastern Libya as Leader Moammar Gadhafi tries to regain areas seized by the opposition in his bid to stay in power, and fighting was also occurring on the ground. Unrest also continues in other African and Middle East nations. This has prompting worries about crude oil supplies from the region, and Nymex crude is trading above $100 a barrel.
“The big concern is if the uprisings in the Middle East spill over into Saudi Arabia,” said Kevin Grady, a gold trader on the Comex floor with MF Global. “You’d be looking at adding another $100 onto the price of crude oil…People are very worried about inflation, and that’s why you’re seeing gold rally.”
Even without oil-supply disruptions, there is already physical tightness in many commodities that can add to inflation, he said. Furthermore, if demonstrators succeed in ousting regimes in Middle East nations, concerns about the region and the flow of oil will persist. As commodity continue to go on with quantitative easing with a lot of other commodities are rallying higher, it makes sense that gold will participate in that rally,” he said. Patton looks for gold to target $1,500 an ounce.
“It has moved straight from $1,320 to $1,440 here,” he said. “It is overbought, but can stay overbought. It will at some point need a pullback and maybe just test the most recent breakout it made.”
Meanwhile, momentum-based traders also are piling into the metal on the basis of factors such as higher volume, open interest, moving averages and closes in recent sessions, Gero said.
Silver is following along with gold, but has “more going for it” since it is drawing extra support as an industrial commodity in improving economic conditions, Gero said. Grady also cited recent tightness in the silver market, particularly since exchange-traded fund demand has taken silver off of the physical market.
