Stock Market Watch

Gold Prices End Little Changed

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Gold prices were little changed on Wednesday as concerns about the euro zone debt crisis eased a little. Gold prices had risen sharply on Tuesday on renewed worries about the euro zone and hopes of further monetary easing from the Federal Reserve following a weaker than expected jobs report for March.

On Wednesday, gold futures for June delivery, the most actively traded contract on the Comex division of the New York Mercantile Exchange, eased $0.40 to settle at $1,659 an ounce. Gold prices edged lower as concerns about the euro zone eased a little after Spanish and Italian borrowing costs fell from recent highs.


Even though yields on 10-year Spanish and Italian bonds came down a little concerns about the euro zone still remain. The cost of insuring Spanish debt against default still remains very high. Investors are concerned that Spain wont meet its budget and spending cut targets.

Bill O’ Neill, Principal with Logic Advisors, described the situation in Europe as delicate and said that this is offering gold prices some support. O’Neill said that obviously the psychology surrounding gold is not as strong as it was last year, but at the same time a lot of the background factors that have been driving it higher are still in place.

It may be recalled that euro zone concerns had pushed gold prices to a record high last September. However, prices have come down considerably since then.

In a research note, James Steel, analyst at HSBC, said that the impact on gold prices of a resurgence in euro zone risk concerns is not straightforward. Steel said that under typical circumstances, a rise in investor risk aversion is positive for gold, which is traditionally viewed as a safe-haven asset, but since Europe’s debt crisis began, concerns about the continent have tended to send investors seeking safety into the U.S. government debt, lifting the dollar and dragging on dollar-denominated gold by making the futures appear more expensive for buyers using other currencies.

Commenting on the gold prices over the near term, Walter de Wet, analyst at Standard Nank said to Reutres, “We think gold will be in a range of $1,600 to around $1,690 or $1,700, which is a fairly wide range. Mr. Wet also added that “it will be difficult for gold to break out of that range”.

With U.S equities dropping amid economic uncertainty, safe haven instruments like gold, the dollar and U.S. government debt have benefited from investors, with gold rallying more than 1 percent and U.S. Treasuries yields dropping 4-week lows in the previous session.

Meanwhile, prospects of further monetary easing from fed along with inflation spike in consumer prices in China has also supported the sentiment in gold, regarded as a hedge against rising prices.

Suki Cooper, analyst at Barclays Capital, told Reuters that the broader macro environment still remains positive and in the near term, the floor will be set by a combination of how strong investment demand is and how responsive the physical market is. Cooper further said that gold has found more support recently, but it doesn’t have all of the catalysts in place to be driven substantially higher yet.

The SPDR Gold Trust (ETF) (NYSE: GLD) ended the day 0.04% lower at $161.04, the Market Vectors ETF Trust (ETF) (NYSE: GDX) ended the day 1.13% lower at $46.48, and the iShares Gold Trust (ETF) (NYSE: IAU) ended the day 0.09% lower at $16.15.

The iShares Silver Trust (ETF) (NYSE: SLV) ended the day 0.49% lower at $30.66, the ProShares Ultra Silver (ETF) (NYSE: AGQ) ended the day 0.94% lower at $51.83, and the ProShares UltraShort Silver (ETF) (NYSE: ZSL) ended the day 0.92% higher at $11.

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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.


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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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