Stock Market Watch

Gold Prices Fall But Recovers From Lowest Level of 2012

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Gold prices inched lower on Wednesday but still recovered from year-to-date low as euro received some boost amid speculation doing rounds that France and Germany will act to make sure Greece continues to stay in the currency bloc even as gains in U.S. equities helped gold extend gains.

Gold has moved in tandem with riskier assets like U.S. equities and oil this year.


A small rebound on Wednesday helped the metal to rise above $1527 an ounce level- which was a lowest level so far this year and 20% plunge since September when Gold touched its peak, indicting bearish sentiment.

Spot gold dropped $5.06 to $1,539.04 an ounce, while U.S. Gold futures for June delivery fell $20.50 an ounce to settle at $1,536.60.

The SPDR Gold Trust (ETF) (NYSE: GLD) 0.19% lower at $149.46.

Meanwhile, euro witnessed a very volatile trading day on Wednesday. After touching to 4 month low against the dollar on Tuesday, euro steadied on Wednesday even as European equities recovered from its lowest level for the year by the end of the day. However, euro received another jolt when sources from ECB said that the Central bank has stopped refinancing operations with some Greek banks.

Even though both France and euro-zone’s paymaster Germany talked of doing everything to keep the union intact thereby soothing investors’ nerves to some extent, all eyes will closely focused on Greece’s reelection, slated on June 17th.

If radical leftists win the reelection in Greece then spilt in the euro-zone will be inevitable. Leftists have been vehemently opposing the strict austerity measures imposed on Greece-which according to them have resulted in economic hardships, throwing the country into recession.

Fears of Greece departing the euro-zone have weighed heavily on gold and euro. Market participants are concerned that in an event of Greece’s exit, the risk of contagion will spread to other countries like Portugal and Ireland, threatening financial stability of the global economy.

Commenting over this matter, Anne-Laure Tremblay, an analyst at BNP Paribas said to Reuters-CNBC, “Negative market sentiment seems well entrenched and we may see further downside in the price. In particular, we could see further cross-asset liquidation if the probability of a Greek default increases in the next weeks.”

Echoing the same feeling held by Tremblay, Robin Bahr analyst at Societe Generale said to Reuters “It’s difficult to see a turnaround just yet. There will be one, but I don’t think this is the time, just when we are in the eye of the storm”

Bahr also warned on further freefall in the bullion market as he said “Clearly, with people staring into the abyss, it could (fall) $50 or even $100 lower as it washes out. That is the unpredictability of it all and as equities fall, as the Greeks take money out of the banks and the banking sector collapses, I suppose you’d have to be wary of further price falls just to cover for losses in other markets.”

In some other precious metal markets, silver lost 1.95 percent to $27.15 an ounce, thus marking eight successive days of losses. The losing streak is longest since late August 2008, when the metal extended losses for 10 successive days following the meltdown of the financial markets at the height of sub-prime property market collapse.

While Silver prices have fallen by 11.5% this time, gold prices dropped 6 percent over the same period.

The gold/silver ratio — a gauge on number silver ounces required to buy one ounce of gold stands at 56.07, the highest reading since the start of the year. Higher ratio indicates gold’s outperformance to silver.

Platinum edged up 69 cents to $1426.99, and its sister metal palladium slid $5.03 to reach $588.47.

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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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