Gold Prices Up, Silver Prices Gain As Well

Gold prices edged higher on Thursday but remained below $1,400 an ounce as fears over global macroeconomic slowdown and rising fears of central banks liquidating bullion holdings to reduce debt has weighed on metal’s both inflation-hedge and safe haven appeal. Silver prices also edged higher on Thursday.

At last check, gold futures for June delivery edged up 0.80% to $1,393.80 an ounce while spot gold climbed 1.27% to $ 1,394.01 an ounce. Silver futures added 0.59% to $23.445 an ounce.

Although the demand for gold has jumped sharply in Asia after the metal prices momentarily slumped to a two-year low on Monday, the weakness in the paper-gold market implies that buyers might once again disappear and wait for the prices to fall further.

Speaking to Reuters, Joyce Liu an investment analyst at Phillip Futures, Singapore said “You can see that sentiment is very fragile, very weak. The downtrend may not be over and U.S. investors have kept selling over the last two days.”

“If we continue to see this kind of drop, then maybe the physical buying won’t be sustained because people will think the price is going to drop further. We may actually see a decrease in physical demand,” added Liu.

Liquidation of gold-backed ETFs continued on Wednesday. A data provided by Reuters showed that holdings of the SPDR Gold Trust (ETF) (NYSE: GLD), the world’s largest gold-backed exchange traded fund, fell to a three-year low level.

Investors have been unwinding their bullish bets on gold as they fear that the Federal Reserve’s monthly $85 billion worth asset purchase program might come to an end by the year-end. The minutes from the Fed’s latest FOMC showed that some policymakers were in favor of halting the quantitative easing or QE3.

Besides, the Cypriot government’s decision to liquidate gold holdings to cover the past of the bailout requirements has sparked off fear that other central banks could also follow the suit.

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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.