New York — Gold rallied late Friday in the face of a stronger U.S. dollar and ended higher for a third straight week on investor sentiment amid inflation concerns and economic uncertainty.
The metal has seen strong support from renewed central bank interest, buying by prominent hedge fund managers including John Paulson, and signs of simmering inflation.
“People want to buy gold on breaks. Gold will hold its stability relative to other asset classes as long as there are economic uncertainty and potential for inflation going forward,” said Adam Klopfenstein, senior market strategist at Lind-Waldock.
December gold settled up $4.90 at $1,146.80 an ounce on the Nymex. December has now ended higher for a sixth straight session.
Spot gold was at $1,150.10 an ounce at 3:38 p.m. ET, against $1,143.50 late in New York on Thursday.
India's acquisition of 200 tonnes of bullion from the IMF boosted interest in gold earlier this month. The impetus from the move pushed gold through key technical resistance levels, taking gold to a record $1,152.75 an ounce on Wednesday.
The metal may be due a correction after this month's sharp price rise, analysts said, but in the longer term it is likely to resume its climb.
“The perception is very positive now because of central banks buying gold, but they are buying it off the market. It doesn't change global holdings of the central banks,” said Wolfgang Wrzesniok-Rossbach, head of sales at Heraeus.
“It gives some support, but I think gold has moved too much in too short a period of time.”
Earlier in the session, gold was being capped by strength in the dollar and weaker equities.
Traders said the fact that gold was able to climb despite the headwinds of a stronger dollar, weaker equities and lower oil prices showed strong underlying demand.
Strength in the U.S. unit weighs on gold, as it cuts its appeal as an alternative asset and makes dollar-priced commodities more expensive for holders of other currencies.
Analysts said gold was likely to take support from interest in the metal as a hedge against inflation, which some fear will hit the markets longer term as a result of money flooding into economies via quantitative easing.
Andrew Cole, manager of the Baring Multi Asset Fund, told Reuters on Thursday that gold could hit new highs this year and next as investors look for an inflation hedge.
Frank McGhee, head precious metals trader of Integrated Brokerage Services, said that a late Friday rally in gold suggested explosive moves higher could be possible early next week.
“There is very little you can paint a picture for a downside in gold at these levels,” Lind-Waldock's Mr. Klopfenstein said.
Silver was at $18.49 an ounce against $18.51. Metals consultancy GFMS said on Thursday the metal may rise above $20 an ounce as surging investment more than offsets a drop in fabrication demand.
Platinum was at $1,444.50 an ounce against $1,441.50, while palladium was at $361 against $366.
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