Gold Prices End Marginally Lower


Gold prices pared its initial small gains to end marginally lower on Friday as overall sentiment continued to remain bleak in the backdrop of upcoming U.S. Presidential elections, ambiguity over the so-called ‘fiscal-cliff’ and  falling quarterly profits from some of the world’s biggest companies on either side of the Atlantic.

Spot bullion has now dipped for third successive week; after peaking at $1,795.69 an ounce earlier in October.

On Friday, spot gold inched lower to close at $1,710.85 an ounce while U.S. gold futures for December delivery slipped 0.1% to settle at $1,711 an ounce. A data provided by Reuters showed that trading volume was on course to end below its 30 day moving average.

Earlier on Friday, gold prices ticked marginally higher after U.S. GDP data release showed that world’s largest economy grew by 2% in the fiscal third quarter even as analysts polled by Reuters had forecasted GDP growth of 1.91%.

The SPDR Gold Trust (ETF) (NYSE: GLD) ended the day 0.05% lower at $165.94.

Nevertheless, the better-than-expected GDP data failed to excite the market as investors are treading with caution ahead of the U.S. Presidential elections. The other cause of concern is the looming threat of massive spending cuts and increase in taxes if the lawmakers in Washington fail to reach over an agreement for bringing control on fiscal profligacy by the year end.

Until then it seems very likely that the momentum in the bullion market will remain elusive.

Speaking to Reuters over absence of sufficient factors that drive gold prices, Jeffrey Sica, chief investment officer at SICA Wealth, which manages more than $1 billion in assets said, “I don’t believe gold is able to rally off of that (GDP) data for now. Gold is a momentum asset and its momentum is not there right now.”

However, the yellow metal is up 10% YTD and is on course to post gains for twelfth consecutive year.

The other factor which is weighing on bullion is the report which said that Ben Bernanke is not keen to extend his term for third occasion even if President Obama wins November 6 elections.

Looking back at Mr. Bernanke’s two terms at the office as a Federal Reserve’s Chairman, it is very evident that his policies have been extremely accommodating in the wake of financial crisis and subsequent recession. Analysts fear that without Mr. Bernanke, the monetary easing and the period of ultra low interest rates will be greatly reduced.

“Without Bernanke, monetary stimulus from the Federal Reserve could be greatly reduced, and that will weigh on the price of gold,” commented Jeffrey Sica.

Meanwhile, the euro zone continues to worry global investors. During this week series of economic data emanating from the troubled monetary union, pointed towards lack of hope in businesses and possible contraction of the economy in the fiscal fourth quarter. Euro zone’s preliminary manufacturing data for October, the Ifo Index (which is gauge on business confidence in Germany), and GDP data release from Spain all pointed towards further stagnation in the economy, weighing on the euro and gold prices. Besides, the ambiguity surrounding Spain’s decision over sovereign bailout continues to keep investors edgy.

While the environment of uncertainty, typically, augurs well for gold prices as investors seek safety in safe haven assets; this year, it was altogether different since the metal mainly tracked the U.S. dollar, commodities and equity markets, which in turn capped gold’s gains.

Moving onto some other precious metal markets, silver futures for December delivery inched lower 0.1% to end at $32.04 an ounce. Platinum fell 1.2$ to settle at $1,541 an ounce and palladium lost 1% to close at $595 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.

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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