Yesterday, gold hit a near one-year high as the markets entered a new quarter with a weak dollar and the specter of central bank demand looming in the background. The spot price of bullion shot over $1,790 per ounce—a level not noted since last November.
Nearly 4.0 million ounces of gold were traded on the domestic futures market, and it’s possible the central banks were involved in some of the dealings.
"When the dust settles, I wouldn't be surprised at all if we learn that central banks have been buying gold over the last couple of weeks" said Adrian Day of Adrian Day Asset Management in Annapolis, Maryland.
"The central banks typically do not tell upfront if they're buying gold, but they were in the market during the summer, as we belatedly found out, and they could be keeping up with that momentum now," said Day, whose firm manages about $200 million in commodities, about a third of that in gold holdings.
In the second quarter, bullion was trading between less than $1,530 and slightly over $1,680, while spot price slid down 4 percent from the first quarter. In the third quarter, approximately 11 percent in gains were noted, with trading going over $1,787 per ounce.
Onn Monday, bullion rose to $1,791.20 while U.S. futures settled up 0.5 percent at $1,783.30. Back in November 2011, gold had peaked over $1,795.
If a continued weakness in the dollar and strong risk appetite hold, the futures market may well break the $1,800 mark, analysts anticipate. A monthly report on U.S. unemployment is due this Friday, as is a meeting of the European Central Bank.
Yesterday data was released showing an unexpected bump in domestic manufacturing in September – the first time since May. The euro also made a strong showing against the dollar on Monday, ending a three-week low period. However, it’s not known when Spain will make their request for a bailout from the ECB in exchange for lowered borrowing costs, and this lively mix of factors is going to keep gold prices unstable in the near future.
The market may shift around a bit in anticipation of Friday’s report. Last month, the U.S. Fed promised to pour $40 billion in cash into the financial system each month until the unemployment rate lowers. And the ECB and China’s central bank have implemented their own stimulus plans over the past few months. Gold is likely to climb more, but not without some dips, analysts say.