Gold wavers as platinum, palladium rally


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Nov. 13, 2012, 12:07 p.m. EST

Gold wavers as platinum, palladium rally

Gold weighs dollar, Greece; platinum up on supply deficit forecast

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By Myra P. Saefong and Robert Daniel, MarketWatch

SAN FRANCISCO (MarketWatch) — Gold futures wavered Tuesday, seesawing between gains and losses as the dollar pared some of its gains and euro-zone finance ministers deferred releasing the next round of emergency funding for Greece.

Platinum and palladium, meanwhile, rose as precious metals company Johnson Matthey forecast supplies of the two metals would come up short of demand this year.

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Gold for December delivery GCZ2 -0.23%  fell 70 cents to $1,730.20 an ounce on the Comex division of the New York Mercantile Exchange.

Part of Tuesday’s trading was “just a play on the euro falling against the dollar, and gold fell as well,” said David Beahm, vice president at precious-metals investment firm Blanchard & Co.

Gold futures had touched a low of $1,717.60.

“However, between the fiscal cliff, debt ceiling, ‘QEternity’ and the mess in Europe, gold traders are certain of gold’s continued success,” Beahm said.

“It will be a huge hurdle [for the U.S. government] to overcome the fiscal cliff set for Jan, 1, 2013,” he said. “All of the scenarios which could happen with the fiscal cliff are all positive for gold.”

The fiscal cliff refers to the package of spending cuts and tax increases that would kick in next year if Congress and the White House can’t agree on a package to help put Washington’s budgetary house in order.

On Monday, December gold settled unchanged, supported by strong demand out of India and concern about inflation in Japan, but hindered by uncertainty linked to the U.S. fiscal cliff and the European debt crisis.

“There are so many developments taking place out of the public’s view that are enormous game changers for the global economy in the weeks, months and years ahead,” said Julian Phillips, founder and writer at GoldForecaster.com. “The U.S. is preparing for a different role in this world and for the potential changes that lie ahead as the current balance of power comes under pressure.”

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“Gold will see a growing and dramatic change in its role in the global monetary scene too,” he said.

In Europe, Jean-Claude Juncker, the prime minister of Luxembourg who chairs Eurogroup meetings of regional finance ministers, said the ministers hoped to agree on Greece at a meeting set for Nov. 20.

At the same time, “it appears clear that Greece will be given two years longer to consolidate its national finances and to implement the necessary reforms,” Commerzbank analysts said. The continued “cliff-hanger situation in Greece suggests that the gold price will rise.”

“I’m afraid it is going to take another serious breakdown in economic activity to see real leadership [in the U.S. and Europe] and solutions other than ‘borrow more money’ come forth,” said Jeffery Born, a professor of finance at the D’Amore McKim School of Business at Northeastern University. “As a result, in the near-term, I’m bullish on gold.”

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The dollar, meanwhile, has pared its gains, easing some of the pressure on gold. The dollar index, DXY -.00%  which benchmarks the buck against a basket of six rival currencies, traded at 81.069, off the day’s high of 81.241, though still up from 81.052 late Monday.

A stronger dollar tends to make commodities denominated in the greenback more expensive for holders of other currencies to buy.

Palladium leads percentage gains

Among other major metals, palladium and platinum rallied as Johnson Matthey forecast a supply deficit this year for both metals.

December palladium PAZ2 +4.15%  added $24.60, or 4.1%, to $632.65 an ounce, leading the advance in the metals sector. Platinum for January delivery PLF3 +1.15%  kicked up $18.90, or 1.2%, to $1,585.40 an ounce.

The platinum market is forecast to see a deficit of 400,000 ounces, according to Johnson Matthey’s Platinum 2012 Interim Review, as recent mining strikes in South Africa are expected to result in a 10% drop in worldwide platinum supplies this year to 5.84 million ounces.

In South Africa, platinum supplies are expected to fall 12% year on year to 4.25 million ounces, which would be an 11-year low, the report said.

Reuters Enlarge Image

Gold prices are falling Tuesday.

Lower supplies and higher demand for palladium will also send that market into a deficit from a surplus for this year, the report said. Lower output from Russia and the “diminishing likelihood” of a significant increase in output from South Africa are likely to cause palladium supplies to fall further in 2013. See The Tell: Platinum market set for supply deficit: report.

Silver, meanwhile, looked to recoup Monday’s losses, with the December contract SIZ2 -0.11%  adding 18 cents, or 0.6%, to $32.70 an ounce after losing 0.2% in the previous session.

Also Tuesday, December copper HGZ2 +0.10%  tacked on 2 cents, or 0.6%, to $3.49 a pound.

Myra Saefong is a MarketWatch reporter based in San Francisco. Robert Daniel is MarketWatch's Middle East bureau chief, based in Tel Aviv.

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