Gold Up Over Oil

The euro rallied back against the dollar during overseas trading this morning and thanks to that bit of a push, gold and oil also rebounded. The tentative automaker bailout helped the euro push the two commodities and one currency higher. With it, Asian shares also saw a one month high as traders and analysts are hoping that governments worldwide take a cue from the United States and help their own ailing industries in an effort to increase consumer spending and fighting back against the worldwide recession.

Gold was up $2.245 from closing on Tuesday in New York, ending at $777.75 per ounce. Many investors had been selling gold to cover losses from equity sell-offs, sending bullion to a low of $680 an ounce in October, the lowest it had been in over a year. Referring to the intraday high gold saw on Monday, a Hong Kong dealer commented, “I guess the potential for the upside is there. Technically, gold should break the $780 resistance level to sustain the uptrend because we’ve also seen profit taking in Asia.”

While gold, oil and the euro rose, the White House and representatives of the Democratic Party got together to reach an agreement on a $15 billion automaker bailout. The agreement is still tentative and there will need to be a final vote on it in Congress before federal loans can be issued. The bailout is in an effort to preserve a few billion jobs in the United States instead of allowing the companies to file bankruptcy and lay off people who desperately need their jobs.

Gold, however, has been struggling to maintain its upward momentum ever since it hit a two-month high of $931 an ounce in October. Oil and other equities are weak and they are having an impact on the value of the bullion. The bullion was 25% below a lifetime high of $1,030.80 in March of 2008, a high that was boosted by fears of rising energy costs that spurred investors to buy.

Says Kazuhito Saito of Interes Capital Management in Tokyo, “There’s bargain hunting in Japan because OPEC will cut production next week. So we also see short-covering in the crude oil market.” Oil rebounded to $43 a barrel during the aforementioned bargain hunt after an overnight slump of 4% thanks to a lower forecast for U.S. energy demands and deepening global recession fears. OPEC has been watching oil prices slide since July where it peaked at over $100 per barrel. The oil distributing countries have already agreed to cutting out 2 million barrels per year of output in order to support prices and all of the member nations are leaning towards the agreement. They will meet on December 17, 2008 to decide.

Platinum also got a lift from the auto industry bailout plans as it is used in manufacturing catalytic convertors. It is trading at $811.50 – a far cry from March’s $2,290 – and according to a dealer in Hong Kong, “It seems the news supports platinum but we are also expecting global auto production to slow down as well because of the recession. The support is rather limited.”