By Frik Els
On Wednesday gold continued to build on gains sparked by disappointing US economic news and a weaker dollar.
Gold futures trading on the Comex market in New York for delivery in December, the most active contract, were exchanging hands at $1,353.70 an ounce, a three week high. Gold is now up some $50 since the release of weaker than expected payroll data on Friday.
Yesterday, the price of gold enjoyed another leg up – the best one day gain since June's Brexit poll surprised markets – when a reading of economic activity from the US Institute for Supply Management fell to its lowest level since February 2010.
The weak data poured cold water on expectations of an early rate hike in the world's largest economy. The price of gold tends to move in the opposite direction of the US dollar and also has an inverse relationship to interest rates.
Gold touched a two-year high in July around $1,380 an ounce and year to date the metal is up 27% or nearly $300 an ounce, one of its best annual performances since 1980.
Georgette Boele of ABN Amro in a new research note dated September 6 says the last couple of days notwithstanding the gold rally is running out of steam and that gold has underperformed despite the many factors working towards its advantage: