It was reported that Spot Gold prices traded sideways till 4.30 pm IST 17 Feb after breaching the highest prices in almost two weeks. Gold prices gained yesterday on the back of improved risk sentiments in the financial markets. Investors were seen flocking towards riskier investments which weakened the low-yielding dollar and pushing up the prices of gold.

Positive economic data releases from Germany and US yesterday led to improved confidence on global economic recovery which led to boost in risk sentiments of investors. However, the European Union has not yet declared on how it would aid Greece and other ailing nations in the Eurozone to overcome its deficit problems. Risk aversion may emerge back if they fail to devise a proper plan which may strengthen back the dollar. Gains in gold prices may be capped if the dollar rebounds back. A stronger dollar usually exerts pressure on gold.

Copper prices gained marginally today after closing above $7000 mark yesterday. The red metal has been gaining amidst improved confidence amongst investors. Inventories of copper on LME remain unchanged today at 5,49,900 tonnes after increasing in the earlier sessions reflecting improved demand.

However, prices may be capped on the upside as Chinese markets remain closed till this weekend and hence would lower demand from the world’s largest consumer of metals. Moreover, the European Union has not yet declared on its ways to help Greece which can hurt investor’s risk appetite.

Crude Oil prices remained a little changed above $77 today after gaining yesterday amidst the weakening dollar coupled with positive economic data releases from US, Japan and Germany. The dollar weakened against the Euro on speculation that Greece won’t need a bailout to overcome its deficit problems.

US Secretary of State Hillary Clinton said yesterday that the US is seeking support from countries to back sanctions against Iran which would help prices to gain. However, the US Energy Department will release data on crude inventories tomorrow. Inventories have been on an increase till last week.

It was reported that world spot copper traded at $3.15/lb this week, the highest price this month, as a declining dollar has fueled demand for metals as alternative assets. Copper futures for May delivery averaged $3.24/lb on Tuesday on both the London Metal Exchange (LME) and the New York Mercantile Exchange’s Comex unit.

The spot global copper price has fallen from $3.35 in January to $3.02 so far this month on speculation that budget gaps in Portugal, Italy, Greece and Spain could derail the global economic recovery. However, Bloomberg now quotes Michael Widmer, a strategist at Bank of America/Merrill Lynch Research in London, as saying that copper and other nonferrous metals futures have climbed in price as traders and investors are “less pessimistic” about Greece’s budget deficit especially and have returned to higher-risk assets.

“Declines in metals this year are not really driven by metals fundamentals, but a broader macroeconomic environment,” Widmer tells Bloomberg in an interview. Copper in LME warehouses is around 549,900 metric tons this week but Widmer says there has been a steady rise in bookings this month to remove 16,000 metric tons of the metal from warehouses registered with the LME-which signals growing demand from manufacturers.

Catherine Virga, senior base metals analyst with CPM Group in New York, tells Reuters that “we are seeing an uptick in physical demand across the base metals complex due to the lower prices.”

Then there’s China, the world’s largest copper consumer. Copper demand is expected to grow by more than 11% in the first quarter.  “The demand picture out of China is still robust,” analyst Dan Smith at Standard Chartered Bank in London writes to clients. “Once China comes back from the New Year holidays things will pick up and this price rebound is an anticipation of that.” Chinese markets are due to reopen next week after this week’s New Year break.

It was reported from NEW YORK/LONDON Reuters on Feb 19 that gold prices rose on Friday, reversing early losses fueled by a stronger dollar, as investors bought the metal to hedge against currencies’ volatility and debt default risks in Europe.

U.S. gold futures for April delivery GCJ0 were up $6.50 at $1,125.20 an ounce at 1:09 p.m. EST (1809 GMT) on the COMEX division of the New York Mercantile Exchange.

“Investors are buying gold as a hedge against currencies’ volatility,” said Carlos Sanchez, a metals analyst with CPM Group. “Gold seems to be consolidating near the $1,130 an ounce area.”

Gold priced in euros hit a record high of 826.35 euros an ounce as investors sought to diversify away from the beleaguered single currency.

Spot gold was bid at $1,124.45 an ounce at 1:13 p.m. EST (1813 GMT) against $1,111.40 late in New York on Thursday, having earlier touched a low of $1,098.55.

The metal’s usual relationship with the U.S. currency — strength in which normally weighs on the precious metal — has weakened as fears over the outlook for paper currencies in general lifted interest in bullion as an alternative asset.

The dollar hit an eight-month high against a currency basket on Friday, extending gains after the Federal Reserve’s surprise decision to raise its discount rate, its first hike in the rate since mid-2006.

Debt monsters of the past have tended to end in deflationary depressions, but it’s important to understand that gold can rise in this kind of environment. Remember, gold rises during economic uncertainty. In the early 1930s, for example, during the Great Depression, President Roosevelt raised the price of gold almost 70% from $20.65 to $35 an ounce in a struggle to bring back inflation.

Gold is money. It’s the currency of last resort when monetary times are difficult. So when gold rises in all currencies, as it’s been doing for several years, you know the rise is enduring and superior. So even though gold has no yield or earnings to measure like the other markets do, it has true value.

The central banks are flooding the markets with their own currencies, and competitive devaluations will continue to grow. Many countries depend on exports for economic survival. This means the best price in the current deflationary environment wins, which is what a cheaper currency does.

This situation originally started with globalization and it’s bullish for gold. The U.S. is still in a delicate situation. It needs a weaker dollar to compete and stimulus measures must continue, which are both ultimately bullish for gold.

This is one important reason why we do not think gold or commodities are in a bubble. We believe they are rising within a mega trend that could last several more years, perhaps a decade. Some say that China is in a bubble and if they are, the demand for commodities will fall. China may be overheated but we don’t think it’s in a bubble. Their growth, even if it’s only a part of what they claim, is solid.

It was reported from NEW YORK that gold prices may have retested the $1,100 support zone after the Fed’s surprise discount rate hike announcement, but the market has stabilized and Kitco Metals analyst Jon Nadler says there are more pressing issues on the plate right now.

Although Nadler agrees that Thursday’s announcement was “psychologically beneficial for the dollar, but not so hot for gold,” he maintains that the impact has been small so far.

“By this morning the realization that the discount rate is not the Fed funds rate started to sink in among speculators,” Nadler explained. He adds that “it was a surprise announcement, but one shouldn’t read too much into it… The hike only affects $14 billion worth of borrowing.”

At the moment, Nadler, like many gold observers, is more focused on the IMF’s (International Monetary Fund) decision to sell 191.3 tonnes of gold from a previously planned sale of 403 tonnes of gold.

That move could indeed hurt gold prices. “This is a more critical situation because the market is already in surplus supply mode,” Nadler explains.

Nadler notes that he isn’t completely ignoring the Fed discount rate hike announcement, given that it forecasts a possibly more qualitatively important Fed funds hike between August and October. This signals that the dollar could rise against the Euro, putting pressure on gold prices.

On a long-term basis, Jon Nadler  is looking at lower gold prices as he sees continued dollar strength – as well as the Fed shift towards an exit strategy whereby it is less accommodative and more inclined to mop up excess liquidity. Still, Nadler argues that no downward spiral in gold prices is on the horizon.

In January, Nadler projected a price range of $880 to $1,280 an ounce for the next six months, taking volatility into account. It sees a price range of $970 to $1,170 in the short-term.

Nadler continues to encourage his investors to hold a 5% to 10% core allocation in gold, even if prices edge lower. “There’s no reason to shift out of that,” he said.

Gold futures for April delivery was falling $2.8 to $1,115.90 an ounce at the Comex division of the New York Mercantile Exchange Friday.

It’s hard to believe so when some of the smartest and wealthiest financial investors keep buying it. Gold being a tangible asset not a paper one is considered to be valuable in times of declining paper assets.

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Multibillion dollar investments are being made in gold today.  Only one could think that the prices are still relatively low.  Most investment portfolios do not have Gold in them.  With today’s investment gold rush, a shift of portfolio funds may cause prices to jump to $1300.