Gold closed the week at $1,292.20 an ounce on the Comex division of the New York Mercantile Exchange, up 1.1% on the week and registering its second consecutive weekly gain. The recent modest rally has made some retail traders scramble to cover their positions. Still a high risk of a significant short squeeze remains and that will propel gold prices higher in the coming weeks. This is due to still robust demand for physical gold mostly from Asia and the emerging markets.
Continuing strong physical demand from central banks in the Middle East and Asia helped prices gain during the past week.
Gold’s advance came as the U.S. dollar pulled back from Thursday’s gains, with the dollar sitting at 82.606 Friday, down from 82.783 late the previous day. Gold futures, like those of many commodities, are usually denominated in dollars, a fall in the U.S. unit makes gold less expensive to holders of other currencies, encouraging buying.
The yellow metal has also gained recently on congressional testimony from Federal Reserve Chairman Ben Bernanke. He said the U.S. central bank had no set timetable for slowing its stimulus. Mr Bernanke on Thursday also said that no one really understands gold, including himself. However, a number of analysts offered a good explanation about how a fall in production among miners and strong demand out of Asia will provide good support for gold prices.
Further, expectation among the investors that the physical demand may rise supported prices to trade in the green territory.
Market observers, who remain bullish commented that gold prices are consolidating to take out that tough level of resistance. Some believe the US Federal Reserve is moderating its tough talk about ending the bond-buying program, known as quantitative easing. However, these talks are circulating for a long time by now and most of the market participants have already positioned their assets accordingly.
