Gold Prices end almost Flat, but posts weekly losses

Gold prices held steady on Friday but lost 0.3% for the week as investors wait for more concrete actions from central banks, especially from the European Central Bank (ECB) following German Chancellor Angela Merkel’s support to the ECB’s bond buying program.

Earlier on Thursday, bullion saw a bit of rally after comments made by Merkel on ongoing efforts from the ECB to douse debt crisis in the euro zone, lifted the euro and investors’ sentiment in the yellow metal. Speaking to reporters in Canada, Merkel showed strong commitment towards preserving the euro even as she approved the resumption of the bond buying program.

However, Friday was relatively quiet as investors now expect some bolder actions not just talk from the central banks. Commenting over this matter, Sonny Tahiliani, managing director at MacroMoves, a New York-based consultancy said to MarketWatch, “Gold was buttressed initially by Merkel’s supportive [European Central Bank]-related comments, but as usual the effect of political rhetoric is fleeting.”

Since February 2012, gold prices have been tightly range-bound. It has hovered around $1,525-$1675 an ounce in last four months as both the fed and ECB stopped short of offering any aggressive additional monetary easing measures. Investors hope that at least in the second half of the year, central banks swing into action, which in turn strengthen gold’s inflation hedge appeal.

“Until we see some real stimulus or (quantitative easing) in western economies materialize, I believe we’ll see continued volatility,” added Tahiliani.

Echoing Tahiliani’s views was Julian Phillips- editor of the GoldForecaster.com and SilverForecaster.com.  In a note to investors, Phillips wrote, “Angel Merkel has to do more than simply confirm her confidence in and commitment to the euro.”

Adding some support to bullion on Friday was a day before news report that Spain was all set to ask for euro 100 billion ($123 billion) from the euro zone bailout fund. Nonetheless, European Commission spokesman Olivier Bailly while speaking to reporters denied any such request by Spain.

Meanwhile, gold’s physical demand continues to remain feeble. According to World Gold Council’s report, released earlier this week, the demand for physical metal slumped 7% in the first six months of the year. Even though, central banks continued increasing holdings of gold reserves, demand from dealers and investors from world’s two biggest gold markets—China and India—remain muted due to economic slowdown.

In the U.S., trading volume in gold futures has been consistently 30%-40% lower than 30 days moving average for last two weeks, a data provided by Reuters showed. Investors have preferred to stay on the sidelines before the Federal Reserve, which is slated to meet at annual symposium in Jackson Hole, Wyoming on Aug.31, throws more light on additional monetary easing.

Until then, gold is likely to follow currency markets and any weakness in the euro is likely to hurt the demand for the metal.  In a note, Sharp Pixely wrote, “Gold is still very much in dollar-watching mode.”

Spot gold added 30 cents to settle at $1,614.60 an ounce, but slid 0.3% in the week.

U.S. gold futures lost 20 cents an ounce to close at $1,619.40. According to Reuters, the trading volume was more than 50% below its 30-day moving average.

The SPDR Gold Trust (ETF) (NYSE: GLD) ended the day 0.10% higher at $156.72.

Platinum continued to rally on Friday as ongoing labor unrest in world’s third biggest Platinum producer, Lonmin , have resulted in supply chain disruptions. Rival unions clashes in South Africa have claimed more than one dozen lives and production of platinum has to come to a grinding halt, leading to large scale speculative buying.

Spot platinum leaped 2.3% to close at $1,467.38 an ounce and sister metal palladium climbed 4.2% to settle at $603.75 an ounce.

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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.