Stock Market Watch

Gold Prices Drop for a Second Straight Day

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Gold prices fell for the second successive day on Tuesday, keeping below the $1700 level even as U.S. retail sales data signaled economic recovery and the Fed maintained its monetary policy intact. Earlier, there was widespread anticipation among market participants that the central bank in its meeting might decide to provide further monetary stimulus through QE3.

Futures on gold for April delivery fell $5.60, or 0.3%, closing at $1,694.20 an ounce ,on the Comex division of the New York Mercantile Exchange.


Spot gold was losing 2.1 percent at $1,663.99 an ounce by 3:47 p.m., having earlier hit a seven-week low of $1,661.99 an ounce.

Gold shed almost $100 or 5 percent on February 29 when Fed Chairman Bernanke did not mention another round of easing in a statement in his testimony to the U.S. Congress.

Since late February, bullion lost 7 percent as some funds might have exited the bullion trade on fears central banks could be done with quantitative easing or freeze on asset purchases by the Fed.

Commenting over drop in gold’s price, Frank Lesh, broker and futures analyst with FuturePath Trading in Chicago, said “We are running into some headwinds here”. He also said being highly mature asset; huge gains are difficult to come by. “Gold is a bull market but it is a very mature bull market, [meaning] gains are a little harder to come by,” concluded Lesh.

Lesh believes that higher dollar and absence on any hint from the Fed concerning quantitative easing halted bullion’s onward march.

Earlier on Monday, gold prices retreated after three consecutive sessions of gains, last week. However, with no signs of further monetary easing emerging from fed’s open market meeting on Tuesday, the sell-off pressure continued in the bullion market.

On Tuesday, after its policy meeting, the Fed, in its policy statement offered just a slight improvement in its economic outlook, saying it expects “moderate” growth over coming quarters with the unemployment rate declining steadily.

Speaking to Reuters, Axel Merk, chief investment officer of Merk Funds with about $700 million in assets, said “This just reaffirms that the Fed is looking…to try to keep interest rates as low as possible and to keep monetary policy as accommodative as possible, and that’s a plus for gold in the medium term”.

In after-hours, electronic trading Tuesday, gold kept plunging, losing $14.10 at last check, to trade at $1,685.90 an ounce.

The SPDR Gold Trust (ETF) (NYSE: GLD) ended the day 1.75% lower at $162.13, the Market Vectors (ETF) (NYSE: GDX) ended the day 0.50% lower at $52.11, and the iShares Gold Trust (ETF) (NYSE: IAU) ended the day 1.69% lower at $16.27.

In Europe, ZEW index, a barometer of investment sentiment in Germany turned positive as the index jumped sharply in March to its highest level since June 2010. The sentiment indicator edged up to 22.3 from 5.4 in February, well above economists’ estimations of a 10.0 reading.

With no more prospect of quantitative easing to sustain a rally in the bullion market, investors have still continued to maintain their interest in the metal. This is evident by the fact that there has been rise in global holdings of gold in exchange-traded products to record highs this week.

Meanwhile, in some other metal markets, Silver for May delivery climbed up 17 cents, or 0.5%, to $33.58 an ounce.

April platinum edged up $6.10, or 0.4%, closing at $1,701.80 an ounce, while sister metal palladium for June delivery rose $4.60, or 0.7%, settling at $708.85 an ounce.

May copper delivery gained 6 cents, or 1.7%, to settle at $3.90 a pound.

 

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edliston
Post Written By: Ed Liston

Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing in his yacht.


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Ed Liston

Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing.

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