Gold and Silver Prices in Red

Gold prices continued to edge lower as euro slipped further against the dollar just ahead of ECB’s crucial meeting on interest rates, even as concerns over Spain’s financial health resurfaced after its cost of borrowing shot-up in a recent bond auction. Meanwhile, silver prices have also edged lower today.

The ECB, which meets in Barcelona to discuss on monetary policy, is expected to resist pressure to do more to fight the debt crisis by maintaining its bond-buying program, to help Spain, which has fallen into recession.

Even though Spain successfully auctioned both three and five year bonds, its cost of borrowing leaped at the latest round of bond auction, pointing investor’s concerns over Spain’s ability to finance itself amid recession.

So far this week, gold has lost 1%, prompting long term and short term investors to cut short positions in the yellow metal. Holdings of gold both in futures market and Exchange traded funds have fallen this week.

At last check, Spot gold was trading lower 0.5 percent at $1,644.90 an ounce, having declined by 1 percent so far this week.

Most-active U.S. June futures were also down 0.5 percent at $1,645.70 an ounce.

“There has been a drop in ETF holdings and the more short-term investors seem to have withdrawn from the market somewhat,” said Commerzbank analyst Daniel Briesemann to Reuters.

Briesemann also believes that apart from firmer U.S dollar, the high correlation of gold to riskier asset classes is probably the most important factor putting pressure on prices (gold) right now.

While holdings of gold in the world’s largest exchange-traded funds have dropped by nearly 1 million ounces since hitting a record high of 70.89 million ounces on March 16,  ETFs have lost 576,575 ounces of metal over three successive months,- the longest string of net outflows since early 2010.

Silver was also down 0.8%, trading at $30.40 an ounce. Platinum slid 0.5 percent, trading at $1,549.49 an ounce, and its sister metal palladium edged lower 1.1 percent at $658.58 an ounce.

In pre-market trading in New York, the iShares Silver Trust (ETF) (NYSE: SLV) is currently down 0.67%, the ProShares Ultra Silver (ETF) (NYSE: AGQ) is down 1.52%, and the ProShares UltraShort Silver (ETF) (NYSE: ZSL) is currently up 0.35%.

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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.