The Azadi gold coin hit an eight-month high as stocks plummeted on the anticipation of further rises in gold prices in the last working week of 2014 and an increase in safe haven demand due to falling oil prices.
Safe haven demand drove gold coins up on concerns about Iran’s widening budget deficit and the governments handling of the anticipated drop in oil revenues. The US dollar and euro also gained against the rial as stocks in Tehran sank to their lowest in the past year.
The Azadi benchmark jumped 1.74 percent and hit 9,960,000 rials by 13:12 GMT on Sunday, in spite of gold’s lower close on Friday in the international market.
Gold slipped on Friday as some buyers cashed in on recent gains, but the precious metal had its biggest weekly rise in two months as the dollar retreated and sliding oil prices hurt risk appetite, Reuters reported.
Gold spot edged lower, falling 0.42 percent or $5.13 an ounce on Friday and closed at $1,222.59 per ounce by the end of the trading session according to Bloomberg generic pricing. Bullion for immediate delivery briefly tested a low of $1214.14 per ounce after a survey showed US consumer sentiment rose in December to a new eight-year high, bouncing back up to the session’s close.
Currencies Gaining Ground
It wasn’t just Azadi that gained on Sunday’s trade. The greenback, sterling and the euro also rose on fears of economic hardship.
The US dollar rose 0.85 percent to 34,580 rials versus the rial by 13:12 GMT Sunday and the euro went up by 0.40 percent to 42,950 rials. Sterling also extended its gains by 0.41 percent versus the rial and traded at 53,950 rials.
On Friday, the US dollar cut its losses against the euro, extended gains against the yen and reached an 11-year high against the Norwegian crown on plunging oil prices and stronger-than-expected US economic data on Friday, Reuters said.
The US dollar index, DXY bounced from its session lows on the data, trading at 88.348, still off 0.35 percent on the day. The dollar erased early losses to trade up 0.04 percent at 118.70 yen.
Crude’s Landmark Fall
Oil prices fell to 5-1/2 year lows on concerns of a global glut, dampening inflation expectations. However, lower energy costs also increase the cash consumers have to spend heading into year-end holidays.
Brent settled down $1.83, or nearly 3 percent, at $61.85 per barrel on Friday, after the world’s energy watchdog – Paris-based International Energy Agency – forecast even lower prices on weaker demand and larger supplies next year. It fell to $61.35 during the session, the lowest since July 2009. US crude finished down $2.14, or 3.6 percent, at $57.81 per barrel. It fell earlier to $57.34, its lowest since May 2009.
On the week, Brent lost more than $7, or about 11 percent. US crude tumbled over $8, or 12 percent. Both markets have lost about 46 percent of their value since their June highs, when Brent stood at above $115 and US crude at around $107.
Bullish Week
Gold advanced 2.5 percent this week after Tuesday’s big rally when it surged 2.2 percent in New York trading hours. Falling stock markets have prompted some investors to buy the metal as an alternative asset, while a drop in the greenback made dollar-priced bullion cheaper for holders of other currencies.
The Azadi has risen in line with bullion for four weeks, capping the precious coin’s largest monthly gain since February. Azadi has gained 17 percent in the past 12-months.
The yellow metal is forecast to rise next week by the majority of participants in the weekly Kitco News Gold Survey. Market participants of the survey include bullion dealers, investment banks, futures traders and technical-chart analysts.
Traders are closely monitoring new developments on Iran’s next year budget while eying the Federal Reserve’s meeting next week for signs of a rate rise.
The Fed’s two-day meeting next week ends with its interest rate decision, due on Wednesday.
US consumer sentiment rose to an eight-year high in December, above economists’ forecasts, according to the Thomson Reuters/University of Michigan survey. The gain was fuelled by improved prospects for jobs and wages, while inflation expectations rose as well, bolstering the case for the US Federal Reserve to raise interest rates next year.
“The implication here is this leads to a stronger dollar,” said Steven Englander, global head of G10 foreign exchange strategy at CitiFX to Reuters.
