Markets: News  

Gold logs sixth-session rise, up 2.3% on week

An earlier version of this report misstated the name of the exchange trading the gold futures referenced. The report has been corrected.

SAN FRANCISCO (MarketWatch) -- Gold futures settled higher Friday, extending their gains to a sixth session and tallying a climb of more than 2% for the week, as the prospect of fresh economic stimulus from the world's central banks underpinned demand.

Gold for August delivery (GCQ2) added $8.50, or 0.5%, to settle at $1,628.10 an ounce on the Comex division of the New York Mercantile Exchange. The metal scored a weekly gain of 2.3%, erasing the 1.9% loss it saw the week before.

"Gold has crept up this week, likely due to a confluence of developments," said Sonny Tahiliani, managing director at MacroMoves in New York.

Those include G-20 central bank affirmations, the Spanish bank bailout, Greek weekend "angst" and U.K. emergency scheme, he said. "The responses required in political economies during a global debt deflation is ultimately positive for gold."

On Thursday, U.K. Chancellor George Osborne said at the annual Mansion House address that the Bank of England will activate an emergency lending program.

A decline in the U.S. dollar and weak economic data from the U.S. also contributed to gold's strength Friday. Weak U.S. data coupled with troubles in Europe have furthered hopes of more monetary stimulus measures from global central banks. Read about Thursday's gold session.

"The weekend ahead could result in major changes for the euro zone," said Julian Phillips, an editor at GoldForecaster.com and SilverForecaster.com, with the left wing evenly matched with the right wing in Greek elections.

If the left wins, "expect major, developed world, financial turmoil," he said. "This heightens risks in all markets, and makes gold and silver a safe place to be."

Greece and the Fed

The Greek vote is expected to determine Greece's future in the euro zone.

On Thursday, Reuters reported central banks of major economies are ready to provide liquidity if needed after crucial elections in Greece this weekend.

European Central Bank President Mario Draghi also said on Friday that the ECB "will continue to supply liquidity to solvent banks where needed."

Gold prices could recover to the "very key" $1,640 level if Greece were to remain in the euro following the elections, said Frederic Pannizutti, senior vice president at MKS Group, a Switzerland-based precious metals refiner and trader.

Any quantitative easing confirmed at the next Federal Reserve meeting "would confirm the trend," he said.

For now, gold appears to be "pricing in a higher likelihood of further liquidity measures" after the Federal Open Market Committee meeting, "either from a continuation of 'Operation Twist' or less certain, a QE3 effort," said Jeffrey Wright, a managing director at Global Hunter Securities.

"If there are no hints or signals after the FOMC meeting next week followed by a press conference, gold will sell off sharply," he said in emailed comments. "I am looking for a signal of slight liquidity to support the U.S. economy and weak job numbers, and think additional efforts with the 'Operation Twist' is the compromise solution for the Fed."

Weak data

U.S. data released Friday showed weakness in the economy, helping to further gold's safe-haven appeal.

The University of Michigan-Thomson Reuters consumer-sentiment index fell to a preliminary June reading of 74.1 -- the lowest level since December -- from 79.3 in May, according to Friday reports. Economists polled by MarketWatch had expected a June reading of 77.8. Read more on the index.

The Empire State index fell to 2.3 in June from 17.1 in May, according to the manufacturing survey released by the New York Federal Reserve. It's the lowest reading since last November. Economists surveyed by MarketWatch had expected the index to pull back to 12.8. Read more on NY factory activity.

And the Fed reported Friday that industrial production slipped a seasonally adjusted 0.1% in May after gaining 1% in April. The market was expecting no change in May. Read more on industrial output.

Other metals ended the session mixed, with silver and copper higher, but platinum and palladium losing ground.

Silver for July delivery (SIN2) added 33 cents, or 1.2%, to end at $28.74 an ounce, closing up 0.9% for the week. Copper for the same month delivery(HGN2) put on 3 cents, or 0.9% to end at $3.38 a pound, up 2.7% from the week-ago close.

July platinum (PLN2) lost 40 cents to $1,487.20 an ounce, marking a 4.4% gain for the week. September palladium shed $4.50, or 0.7%, to $630.40 an ounce, up 3% on the week.

A weaker greenback was lending support to some dollar-denominated metals as well. The dollar index (DXY) , a measure of the greenback against a basket of six major currencies, slipped to 81.621, from 81.917 in North American trade late Thursday. Read more on currencies.