US GOLD OPEN - Risk-hungry funds forsake gold for equities

By: Tom Jennemann

Orlando, Florida 25/01/2013 - Gold futures were left out in the cold on Friday when a newfound global optimism prompted investors to seek out higher-risk, higher-reward vehicles.

Gold for February delivery on the Comex division of the New York Mercantile Exchange was last down $8.90 at $1,661.00 per ounce, an intraday low.

“Perceptibly higher risk appetite among market players, as evidenced by firm US equity markets, put the gold price under pressure yesterday. It fell for a time to a 10-day low of around $1,665, thus temporarily shedding $20,” Commerzbank AG said in a note.

“The price slide was accompanied by noticeable ETF outflows: gold ETF holdings dropped by nearly 5 tons yesterday to their lowest level for two months,” it added.

In wider markets, the euro rocketed to an 11-month high at 1.3464 against the dollar, while Germany's DAX and France's CAC-40 were up 1.25 percent and 0.65 percent respectively, with US equity futures pointed towards a higher open.

European stock markets were boosted after the Ifo business climate index for German industry and trade rose to 104.2 in January from 102.4 in the previous month, beating the 103.1 forecast.

“The German economy made a promising start to the New Year,” the Munich-based Ifo Institute said. “Manufacturers are more satisfied with their current business situation than last month. Optimism is returning.”

The markets have largely shrugged off the fact that the UK economy shrank by 0.3 percent in the fourth quarter of 2012, raising the prospect of a triple-dip recession in the country.

As for the more industrial commodities, light sweet crude (WTI) oil futures for March delivery on the Nymex were up 35 cents at 96.30 per barrel and the most actively traded Comex copper contract was at $3.682 per pound, up 0.55 cents.

Yesterday, there was a flurry of better-than-expected data points. China's HSBC flash manufacturing PMI climbed to 51.9 in January from 51.5 in December and was slightly better than had been expected, while the eurozone January PMI clocked in at 47.5 against a forecast 46.6.

Meanwhile, the number of Americans filing for first-time jobless claims fell by 5,000 to 330,000 last week, easily beating the forecast of 359,000, while the US preliminary flash manufacturing PMI for January rose to 22-month high of 56.1 from 54.0.

“It's a pretty simple situation at the moment. Sentiment towards the global economy, with the UK being the lone exception today, has turned manifestly bullish. In this environment, gold and silver become less attractive as investors would rather jump on board the rally in equities - that's where the action is,” a US-based fund manager said.

As for the other precious metals, Comex silver for March delivery was last down 16.2 cents at $31.560 per ounce. Trade has ranged from $31.31 to $31.815.

“Like gold, silver saw a combination of technical and fundamental liquidation [on Thursday],” the CME Group said in a market commentary.

“Clearly technical liquidation pressure kicked in after this week's lows failed to hold, but more importantly it would appear that safe-haven sentiment is being extracted in a number of markets because of ideas that Washington has found a temporary fix again,” it added.

Platinum futures for April delivery on the Nymex were down just $3.80 to $1,680.00 per ounce, while the March palladium contract was at $724.30, down $2.40.

“Now that people are taking a more optimistic world view, look for the more industrial precious metal, specifically platinum, to hold the upper hand and to be more insulated against price falls,” the fund manager said.

(Editing by Mark Shaw)