SAN FRANCISCO (MarketWatch) — Gold futures closed higher on Friday for the second consecutive session, scoring a weekly gain of nearly 2% as prices continued their rebound from last year's loss to finish at their highest level in nearly three weeks.
Following the prior session's surge, gold for February delivery (GCG4) tacked on $13.40, or 1.1%, to settle at $1,238.60 an ounce on the Comex division of the New York Mercantile Exchange — their highest settlement since Dec. 16, FactSet data, tracking the most-active contracts, show. Futures prices, closed at $1,214 last Friday.
"While bargain hunting and short-covering may have been the initial catalyst for the pop off support [levels], we are now seeing more conviction buying premised on the third failure to sustain losses below $1,200," said Peter Grant, chief market analyst at precious-metals dealer USAGOLD.
"A theme among clients I've spoken to this week has been skepticism about the sustainability of the stock market rally," he said. "They're taking money off the table in equities and using it to bolster their gold holdings."
Silver prices gained along with gold Friday. March silver (SIH4) added 8 cents, or 0.4%, to $20.21 an ounce after an early slip below the $20 mark. Prices for the white metal had jumped almost 4% on Thursday and saw a gain of 0.8% for the week.
AFP/Getty Images So far for gold, support is holding at $1,140 an ounce, said Adam Koos, president of Libertas Wealth Management Group.
"In the short term, we might be seeing the beginning of a bottoming process, but it's very early yet, he said.
On Thursday, gold futures soared by nearly $23 an ounce on reports of physical buyers looking for bargains. China, in particular, was believed to be behind the piqued appetite. The Lunar New Year falls at the end of the month, and that usually means a strong period of gold buying.
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"Since gold took such a beating last year, there are likely a lot of investors who took the opportunity in one of their rare positions with losses on the books to realize those losses for tax purposes," said Koos. Gold futures prices dropped 28% in 2013.
"Since the IRS Wash Sale Rule limits the repurchasing of securities for the purpose of tax loss harvesting to 31 days, there's a chance that we might start to see a bid come back into GLD mid-month, but we'll know for sure whether this hypothesis is remotely correct by month's end," he said, referring to the gold-backed exchange-traded fund, the SPDR Gold Trust (GLD) .
For now, Koos said he's "watching the show from the sidelines and waiting for more of a consolidation to occur with some upward momentum prior to adding a position" in gold.
But Julian Jessop of Capital Economics can be counted in the gold bug camp . "We see plenty of scope for gold to bounce back in 2014," he said in a recent note.
"Indeed, the poor performance in 2013 has left the precious metal looking attractive again compared to other assets, including equities. The bursting of the bitcoin bubble may even make gold look more appealing to Chinese investors," Jessop said.
Elsewhere in metals trading Friday, platinum for April delivery (PLJ4) closed up $9.60, or 0.7%, to $1,414.20 an ounce — up about 2.6% from a week ago, while March palladium (PAH4) rose 95 cents, or 0.1%, to $731.20 an ounce, for a 2.7% climb on the week.
High-grade copper for March delivery (HGH4) , however, fell nearly 3 cents, or 0.8%, to $3.355 a pound, set to extend Thursday's 0.4% session decline. For the week, prices lost 1%.
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