Stock Market Watch

Gold Prices Settle Lower

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Gold prices retreated on Tuesday, ending a five day rally as better than expected data on U.S. manufacturing activities for April dashed any hopes of further quantitative easing, weighing on gold’s image as safe haven instrument.

Spot gold lost $2.87 to settle $1661.21 an ounce.


U.S. gold futures futures for June delivery also slid $1.80 to close at $1,662.40.

Since most markets in Europe and Asia were closed on Tuesday, celebrating May Day/ Labor Day, the trading volume was very thin and gold investors were waiting for the data on U.S. manufacturing to get some cue. However, a data from Institute for Supply Management- which showed April’s index of U.S. factory activity rising to 54.8, the strongest in 10 months, from 53.4 in March, weakened the bullish sentiment on gold.

The general perception among gold investors was that any weakness in factory output data would make fed mull over some kind of quantitative easing measures. Last week’s slower than expected GDP growth data along with Chicago’s IMS data which showed slowdown in manufacturing activities in April, made investors believe that downbeat economic indicators will pave the way for monetary easing measures or QE3.

The metal has lost almost $130 an ounce since February 28 as some strong economic indicators along with less dovish fed’s stance on quantitative easing, put the pressure on the metal.

Nevertheless, gold is still up 6% year-to date, after the U.S. central bank said in January it would keep interest rates at near zero levels at least until 2014 to stimulate economic growth

“The better the economic number, the lower the chance that we are going to see lower U.S. rates through 2014,” said David Meger, director of metals trading of Vision Financial to CNBC –Reuters.

Another factor which has dampened the market sentiment towards gold is the metal’s failure to rise above key resistance at its 100-day moving average. Even though the metal briefly rose above that level on Tuesday; at the end it closed $5 below it.

Commenting over gold’s prices, Matt Zeman, head trader and analyst at Kingsview Financial in Chicago, said to MarketWatch, “Gold still can’t seem to get a lot going for the upside, The metal tested a technical level around $1,670 but failed to go above it, which doesn‘t bode well for short -term trading.”

He also cautioned by saying that “If gold cannot get above that level for at least a couple of consecutive closes, a selloff could ensue.”

But despite metal’s failure to cross the key resistance level,  investor demand remains resilient as holdings for the yellow metal in exchange-traded products (ETPs) posted their largest one-day net inflow in a month on Monday.

ETPs saw their largest one-day net inflows in a month, underpinning investors’ demand for the metal. The metal has swung back into positive territory after remaining in trough for almost three months.

According to a data provided by Reuters, holdings of metal in the world’s largest ETPs soared by 129,120 ounce, or 0.18 percent, by the close of business on Monday to a total of 70.259 million ounces.

The SPDR Gold Trust (ETF) (NYSE: GLD) ended the day 0.35% lower at $161.32.

In some other precious metal markets, silver fell 0.19 percent on the day to $30.94 an ounce. The metal has gained a net 11 percent so far this year.

Platinum edged up 0.11 percent on the day, settling at $1,573.70 an ounce, while palladium slid 0.4 percent, closing at $679.65 an ounce.

The gold/silver ratio- a gauge which shows the number of ounces of silver needed to buy one ounce of gold- has risen to its highest since January 19, having touched a four-month low on Feb. 29.

While gold has lost about 7% in preceding three months, silver plunged almost 18% in the same period.

 

 

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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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