Gold gains after spectacular 2011 finish
A strong euro boosts prices to more than $1,600 despite weak demand in India.
By Alix Steel
Updated at 2:35 p.m. ET
Gold (-GC) rose to more than $1,600 an ounce Tuesday on new-year buying.
Gold prices for February delivery were up $37.40 at $1,604.20 an ounce at the Comex division of the New York Mercantile Exchange. Gold has traded as high as $16.08.70 and as low as $1,566.80 an ounce, while the spot price was up $38.20, according to Kitco's gold index.
The price of silver (-SI) was up $1.74 at $29.65 an ounce, while the U.S. dollar index was down 0.65% at $79.60.
A weaker U.S. dollar and stronger euro were boosting prices into 2012 after a spectacular 10% gain for 2011. While a 10% gain might attract investors looking for top-performing assets after the S&P ended the year flat, investors who remember gold's volatility -- the metal closed down 18% from its intraday high of $1,923 -- might be reluctant to buy.
Gold is also overcoming disappointing import news from India. The Bombay Bullion Association said the country imported 125 tons of gold in the fourth quarter of 2011, down 55% from expectations despite strong seasonal factors such as Diwali, the festival that boosts demand for gold. India imported 878 tons in 2011, which was down more than 8% year over year. To make matters worse, in the first quarter, India might import 143 tons -- half of what it did in 2011.
"For the time being, the gold price will not find any support from this side," Commerzbank wrote. Demand became battered as gold became too expensive to buy in rupee terms and as interest rates remained high. Investors may look to China to make up for lost demand.
"I do see (the slowdown in India) as an aberration . . . but China is continuing to gain on India in terms of consumption of gold," said Marcus Grubb, the managing director at the World Gold Council.
China represented 28% of global jewelry buying in the third quarter and, for only the fourth quarter since 2003, outpaced India in its demand. Grubb says China benefited as it let its currency be revalued upward against the dollar versus India, which had to contend with a falling rupee -- making it more expensive to buy gold.
"We think imports into China could be 400 tons this year," Grubb said. China might be on track to consume 747 tons of gold in 2011. India's gold market was deregulated 20 years ago compared with just 10 years for China, which Grubb says means China's rate of consumption is catching up to India's. Grubb also noted that it needs to continue that trajectory as Indian demand slows.
Copyright © 2013 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.
[BRIEFING.COM] There wasn't a lot of excitement in the stock market today and there is nothing wrong with that. After rallying in broad-based fashion on Friday, the major indices stood their ground (for the most part) amid a lack of conviction from buyers and sellers alike.
Today wasn't a case so much of the stock market going up as it was a case of some influential stocks going up to keep the major indices on a winning path. In fact, decliners were just about even with ... More
More Market News
|There’s a problem getting this information right now. Please try again later.|
LATEST MARKET DISPATCHES
- No more Dispatches; here's where to find market news
The Market Dispatches column has been discontinued. Here's where to find the latest stock and business news on MSN Money, and the latest from market writer Charley Blaine.
- Dow falls 59 as late-day gloom kills a rally
- Stocks held back by fiscal-cliff worries
- Stocks suffer worst weekly loss in 5 months
- Dow off 121 as post-election swoon continues
- Dow slumps 313 after Obama's re-election
- Dow jumps 133 as Americans head to the polls
The energy giant could generate significant returns for shareholders as it shifts away from coal production.