(Kitco News) – Safe-haven demand returned to the gold market Tuesday on uncertainty following news that a European finance minister meeting to discuss the debt crisis on Wednesday was canceled.
Technical buying was triggered on the yellow metal’s ascent, accelerating the move and carrying gold to its highest level in more than a month.
“The market moved up on heavy safe-haven buying,” said Jim Steel, precious-metals analyst with HSBC.
The surge meant the end of one recent pattern, at least for now. A number of analysts, in their early-morning research reports, commented that gold had lacked a safe-haven bid lately and instead tended to track equities and other commodities, acting as an asset that investors purchased during risk-on periods rather than in periods of risk aversion.
But that quickly changed after news that European finance ministers will not meet Wednesday, even though European leaders will go ahead with their summit. Gold soared, even though the Dow Jones Industrial Average has at times been lower by triple digits.
Allen Sykora-Kitco News October 25, 2011
“You’re starting to see that separation (between gold and equities) again today,” said Michael Gross, broker and futures analyst with OptionSellers.com.
As of 1:14 p.m. EDT Gold for December delivery was up $48.50, or 2.9%, to $1,700.80 an ounce on the Comex division of the New York Mercantile Exchange. It traded as high as $1,704.70, its most muscular level since Sept. 23.
While it remains to be seen what happens with any European plan, for now, markets are worried about whether the delay of the finance ministers’ meeting could mean there may not be a resolution to European debt saga as soon as investors previously expected, several analysts said.
“The meeting we’ve been waiting for tomorrow is delayed yet again,” said Jim Comiskey, senior market strategist with MF Global. “The one thing markets fear above all else is uncertainty. And we just got injected with a healthy new dose of it.”
He described trading volume in gold as heavy.
““Gold and silver have finally woken up in terms of safe-haven and refuge status.” Comiskey said.
Analysts also said technical buying played a role in gold’s ascent. Steel said some was triggered around $1,680. Gross also cited technical buying above $1,693. A close above this, he added, could signal further strength.
“You have fears back in the market today,” Gross said. “Investors are asking themselves, ‘What if this (European plan) doesn’t get done after all?’ Any type of disappointment is probably going to hit the stock market, so you probably have some people hedging their bets today.”