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Gold Prices Fall

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Gold prices fell sharply on Friday, settling at $1,660 an ounce thus bringing an end to a strong rally this week as the dollar strengthened against major currencies with euro weakening further due to worries over Spain’s gloomy economic health.

High risks investing instruments like stocks and commodities also came under selling pressure following disappointing GDP growth data released by China two days ago.


While Spot gold price dropped 1.2 percent at $1,654.50 an ounce, U.S. gold futures lost $20.40 an ounce to $1,660.20.

The metal has gained 2.4% this week as the data from the U.S. labor department showed that the job market in the U.S did worse than expected, challenging the strength of the U.S. economic recovery. As a consequence, many analysts are expecting that the Fed can possibly provide another round of quantitative easing. Last year, a sharp surge in gold prices was mainly attributed to ultra low interest rate policies. Nevertheless, a stronger dollar has stalled bullion’s rally on Friday.

Commenting over investors’ sentiment towards gold, Walter de Wet, analyst at Standard Bank said to Reuters, “Especially in the United States, the investment climate is very neutral towards gold at this stage. People really need to see a policy catalyst before they come back aggressively”.

“On the physical side, from the end of this month there is really no seasonal demand coming until August;  It is going to be difficult to break much higher if we don’t have this physical buying supporting any investment demand coming through for the next two or three months,” added de Wet.

On Friday, The greenback gained 0.4% over the euro as the yields on Spanish bonds increased following a statement from the head of Spain’s Central Bank- the Bank of Spain- that the lending from the ECB to commercial banks in Spain increased in March, signifying too much reliance on external funding.

Meanwhile, a report released on Friday showed China’s economy grew at lower than expected rate in nearly three years in the first quarter, with the reading showing  annual rate of expansion at 8.1 percent against original projections of 8.9 percent for the same period.

Meanwhile, European shares continued to tumble on Friday, which was also a fourth straight week of losses as renewed concerns about the rising cost of borrowing in some highly indebted euro zone countries dampened market sentiments.

Will gold regain the momentum?

Although gold has gained 7% this year to date, it struggled to keep up the momentum. This is because; some strong strings of positive economic data in February and March resisted the fed to provide any hint of monetary easing programs.  Besides a stronger dollar has also weighed on gold as most commodities including gold are traded in dollars and any hike in the greenback tends to discourage those traders that hold other currencies.

Meanwhile a poll conducted by Reuters on Friday showed that analysts are turning more cautious towards gold, with bullish forecasts of $2,000 an ounce receding fast as the economy stalls.

Even though the yellow metal remains on course to rally through this year and into 2013, just one analyst of 33 polled expects the metal to average more than $2,000 an ounce this year, against five analysts of 45 in a similar poll in January.

Gold’s physical buying in Asia slowed on Friday as higher prices discouraged new orders from traders; but a gold buying festival in India —Akshaya Tritya – later this month is expected to boost the metal’s demand from the world’s biggest buyer of gold.

The SPDR Gold Trust (ETF) (NYSE: GLD) ended the day 1.15% lower at $160.85.

In some other metal markets news, Silver edged lower 2.7 percent, to close at $31.46 an ounce, spot platinum also dropped 1.0 percent, to settle at $1,582.74 an ounce while spot palladium  was down 1.0 percent to close at $642.00 an ounce.

 

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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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