Gold Prices Ease but Post Strong Gains for Q3

Spot Gold prices eased a tad on Friday as profit booking before the end of the quarter capped gains; however, the precious metal posted its best quarterly gains since more than eight quarters and ended higher for sixth successive week in the backdrop of easing monetary policy adopted by global central banks, raising the inflation outlook in mid to long term.

The precious metal is now strikingly close to its yearly high of $1,790.20 an ounce hit on Feb. 29; and, market participants expect gold to touch $2000 an ounce level in the fourth quarter.

On Friday, gold prices in euro terms jumped to a record high, for second straight day as softness in the euro and economic uncertainty surrounding the troubled monetary union prompted investors to seek safety in gold, traditionally considered as safe haven asset.

Bullion also found some support from the result of stress tests on the Spanish banks. Markets were relieved that contrary to the expectations, the recapitalization required by Spanish banks was much lower. According to the stress test report, Spanish banks require about 53.75 billion ($69.34 billion) to maintain sufficient liquidity. It is hoped that stress report will help in bringing down soaring borrowing costs on Spain’s sovereign debt even as Prime Minister, Mariano Rajoy is considering to request a bailout. Meanwhile, France also announced a series of measures, including hike in taxes for businesses in order to bring down its fiscal deficit.

Nevertheless, the end of the quarter which prompted investors to close bullish bets and book profits while stronger dollar also weighed on the metal.

The ICE dollar Index-a gauge on U.S. unit’s performance against basket of six major currencies—rose to 79.958 from 79.560 in late night North America trading on Thursday.

Commenting over gold’s rising prices and glumness surrounding euro zone due to recession, high deficits, Jeffrey Sica, chief investment officer of SICA Wealth Management said to Reuters, “Gold is being utilized as a protest by investors against governments which are failing miserably to solve their deficit and debt problems.” Mr. Sica also said that gold is likely to climb to record $2000 an ounce level in the net quarter as investors will shun equity and bond markets in favor safe haven assets like gold amid rising global macroeconomic uncertainty.

Spot gold inched down 0.4% at $1,769 an ounce, having earlier hit an intraday high of $1,783.10 an ounce. The metal has climbed 11% in the quarter, highest jump since second quarter of 2010 even as it gained 5% in September. Gold futures for December contract lost $6.60 to end the day at $1,773 an ounce.

ETFs Holdings Soared at Record Pace in the Third Quarter

A data provided by Reuters showed that net inflows in gold backed exchange traded funds were around 3.3 million ounces—a loftiest level in more than last 12 months. Meanwhile, sales of American Eagle Gold coins also increased as gold prices rallied, after the Fed announced quantitative easing.  Coin dealers also anticipate sales could further increase in the fourth quarter.

The SPDR Gold Trust (ETF) (NYSE: GLD) ended the day 0.20% lower at $172.02.

In some other precious metal markets, spot silver edged down 1 percent to close at $34.52 an ounce. However,  in terms of quarterly gains, silver outperformed every other precious metal as it rallied more than 25%.

Spot platinum gained 0.8 percent to end the day at $1,656 an ounce, posting 14.5 percent quarterly rise, and spot palladium edged up 0.7 percent to close at $634 an ounce, on course to post 9% quarterly gain.

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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.