Los Angeles CA, May 18 (Tangible Investments) - by James O'Dell - Gold extended gains for a fifth straight day in early morning dealings on Monday after posting its best weekly advance in four months on Friday when the yellow metal added $3.10 or 0.25 percent to finish the week higher at $1,224.50 an ounce following a spate of disappointing economic data that pushed further into the future any expectations of rate hikes by the Fed. Silver climbed $0.08 or 0.46 percent to end the week at $17.56 an ounce, while the Gold/Silver ratio, the measure of the number of Silver ounces needed to buy an ounce of Gold, edged lower to 69.73.
In the broader markets, the dollar inched higher but remains near three month lows against the euro on Monday, on tepid U.S. industrial production data and lagging consumer sentiment. "In addition to constructive technicals, we see no change in our weaker dollar outlook; this in turn should continue to provide an element of support to commodities in general and to Gold in particular," said INTL FCStone's Edward Meir.
Gold has gained strength above the $1,225 an ounce level this week, a critical technical region, and sustained strength in this area could spark a fresh rally. "If Gold can stay above $1,225, there's room to move to $1,240 and even $1,250, particularly because the $1,175-1,225 range has been in place for quite some considerable period," said Simon Weeks, of the Bank of Nova Scotia.
Meanwhile, Chicago Fed President Charles Evans, in a prepared speech on Monday, called once again for the central bank to postpone any rate hikes until at least 2016. Evans argues that with U.S. inflation so low for so long, the Fed should allow inflation to rise above the central bank's 2 percent target. "Policy should be sufficiently accommodative so that ... the odds should favor modestly overshooting our 2 percent target sometime in the medium term," said Evans, a voting member of the FOMC.
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