Gold pops higher but still facing losing week

In the Lead: “Another Bubble; That of Egos.”

Following a string of losses that has extended over four trading sessions, gold prices tried to stabilize in the $1,630s overnight as a modicum of optimism over Europe’s debt crisis resolution emboldened a few buyers to pick up some bullion. Still, the week will likely be tallied as gold’s worst in one month as the yellow metal’s value eroded by over 3%.

Most trading surveys taken a week ago envisioned a higher gold price for this past week and traders were noted to be at their most bullish since the big price rout took place in September. However, hectic conditions in Europe, equity market turbulence, and fund redemptions kept gold in check despite the calendar showing only one week to go prior to Indian festival time.

Meanwhile, highly elevated gold prices are still making life quite difficult for the largest traditional demand sector for gold; that of jewelry fabrication. The trade has had to resort to alloys employing cheaper metals in order to keep buyers remotely interested in acquiring baubles. Bronze, titanium, palladium, silver, and other less costly metals are being blended into current designs and artists as well as retailers have had to get quite “creative” in order to lure the public into showrooms in recent years.

Once again, palladium appears to be benefiting the most from the above-mentioned market trends. The noble metal is becoming a good substitution candidate for both gold and platinum. As the San Francisco Chronicle reports, “While gold is being displaced by bronze, platinum may be replaced by palladium, a white-colored metal in the same family that sells for about 40 percent of the price. The metal, which also is used in automobiles' catalytic converters, has seen its price drop by more than a third since 2000.

“Palladium is appealing because aside from being cheaper than gold or platinum, it doesn't tarnish like bronze or silver,” said Brooke Brinkman, spokeswoman for Palladium Alliance International. The group is funding an ad campaign for the metal that features former "Baywatch" star Pamela Anderson and fashion designer Kelly Osbourne touting palladium.

Spot gold dealings opened the Friday session with a gain of $18 at $1,639 on the bid-side as sizeable, optimism-driven rallies lifted copper and oil in neighboring trading pits. Gold’s 1.1% gain was hardly a match for the near-5% pop in copper and was quite some distance from the 4.4% lift that palladium benefited from this morning. In the background, crude oil traded $1.13 higher at $87.20 while the greenback fell 0.14 on the trade-weighted index as the euro once again managed to claw its way above the $1.38 pivot point it has been orbiting around during the week.

Silver advanced 51 cents to open at $31.09 the ounce as the mood in the industrial metals’ space showed marked amelioration. Platinum climbed $12 to the $1,503 mark and palladium was $28 higher at $612 per troy ounce. Switzerland was, once again, a net exporter of platinum in the latest reporting period September). For the fourth month in a row exporting continued and the country shipped nearly 16,000 ounces of the noble metal out last month. The situation was similar with regard to palladium; Switzerland shipped more of the metal out than it imported (308K ounces). Standard Bank (SA) metals analysts continue to perceive “value” in platinum and palladium at under $1,600 and $600, respectively.

This morning’s mood among investors was elevated by reports that France and Germany are in fact drawing closer to an agreement on European debt. Albeit nobody expects the situation to be fully remedied over the weekend the hope is that some kind of looking-forward statement might be made as to how and when to take the necessary steps to tackle the nagging issues facing the 17 nations which use the common currency.

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