Gold prices pared Thursday’s gains as Spain’s economy slumped further into crisis with country’s unemployment rate estimated at 24% even as the credit rating agency S&P downgraded the country by two notches, citing concerns over Spain’s inability to reduce its fiscal deficit. The renewed concerns over euro-zone’s financial health weighed on the euro, pushing up the dollar. Silver prices have also edged lower in early trading.
Meanwhile, Japan’s central bank also announced some further quantitative easing measures, putting the upward pressure on the dollar.
A dollar has an inverse relationship with gold; strengthening dollar makes gold expensive for traders who hold other currencies.
Gold, which has been mostly tracking other riskier assets like stocks and oil market, crossed $1,660 an ounce level on Thursday, as weaker dollar, upbeat housing data and fed’s assurance on more monetary easing in case of economy deterioration, pushed up the prices of yellow metal.
However, with the risk premium rising on Spain’s debt, euro was quick to shed the gains on Thursday.
The news come after euro zone economic sentiment fell more than expected in April.
While Spot gold slid to $1,652.60 an ounce by 0622 GMT, on course for a 0.7-percent weekly gain though, U.S. gold was trading at $1,653.30.
According to Jeremy Friesen, commodity strategist at Societe Generale in Hong Kong, with rising economic uncertainty in the euro-zone, an accommodative monetary policy should help support gold sentiment, although a strong dollar could be a hurdle.
Meanwhile, on gold’s physical market front, trading interest was thin, as gold has failed to break beyond the range that it has held for over a month.
Speaking to Reuters, one Singapore based dealer said “We saw some liquidation of long positions but overall not much is happening; People have become sick of trading in the same range.”
“Expect physical buying interest to emerge if prices fall to the $1,620 level,” he said to Reuters.
Among other precious metals markets, silver slid 0.33%, at $31.105 an ounce. Spot platinum hit a weekly high at $1,568.74 an ounce before retreating at $1,560.24 an ounce.
In pre-market trading in New York, the iShares Silver Trust (ETF) (NYSE: SLV) is currently up 0.07% to $30.20, the ProShares Ultra Silver (ETF) (NYSE: AGQ) is currently down 0.18% to $49.99, and the ProShares UltraShort Silver (ETF) (NYSE: ZSL) is currently up 0.80% to $11.30.
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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. |