Transcripts

Gold Prices Take a Shine to the Soft Housing Market

SUSIE GHARIB: The softening U.S. housing market gave gold prices a boost today. Gold futures for August delivery gained $4.80 an, to close at $664.70 an ounce. The precious metal has tacked on $12 in the last four trading sessions. Suzanne Pratt takes a look at where prices could be headed from here.

SUZANNE PRATT, NIGHTLY BUSINESS REPORT CORRESPONDENT: For gold bugs, it looks like patience will be required in the next several months. That's because most experts are now saying it's unlikely the precious metal will revisit $700 an ounce this summer. They point to central bank selling, a strengthening U.S. dollar and higher Treasury bond yields, all of which are putting pressure on gold prices. Gold trader Lou Grasso describes the yellow metal as a follower and he says lately it's been following oil prices.

LOU GRASSO, GOLD TRADER, MILLENIUM FUTURES: If oil can't hold this rally that it's had over the last week or so-- this strong rally up to $69.50 a barrel -- if it can't hold that, I see gold probably falling down below the 200-day moving average, which is about $656.50

PRATT: Gold climbed above $700 an ounce earlier this spring. But it met resistance in the last few months, particularly as investment demand for the precious metal fell off. Analysts explain higher global interest rates are hurting gold's appeal, as it offers no fixed returns. On top of that, gold has had to compete with growing demand for other assets, including real estate and art. And finally, there's the inverse relationship between the dollar and gold. The stronger the U.S. currency gets, the more investors it will lure away from gold. Metals analyst Jim Steele thinks gold prices are consolidating, but says it will be tough for gold to venture beyond $700 in the current environment.

JAMES STEEL, METALS ANALYST, HSBC: Don't forget, two-thirds of gold demand is jewelry demand. And most of that is in the developing world and buyers in India and China and elsewhere are very price-conscious. And you can imagine how expensive it gets when it gets above that level.

PRATT: Some gold experts say it's not out of the question for gold prices to hit $800 an ounce or beyond. But they say that would probably only happen if there was a major geopolitical conflict, such as an escalation of tensions in the Middle East. Suzanne Pratt, NIGHTLY BUSINESS REPORT, New York.