Gold Prices End Lower, Euro Concerns Weigh
Gold Prices fell by almost 1% on Friday, as euro-zone’s unclear picture over ongoing debt crisis led to large-scale selling of euro, boosting dollar while sharp losses in equities and other precious commodities, resulted in investors taking refuge in safer assets like U.S treasuries, and dollar, pushing gold to its lowest level in this year.
The selling pressure also mounted on gold following disclosure from JP Morgan that bank lost at least $2 billion dollar from its hedging strategy- which went awfully wrong, denting market sentiment. Most stocks edged lower on Friday despite a U.S data on consumer confidence rising to its four year high.
Unlike last year, when gold prices received a boost from euro-zone crisis due its safe haven appeal, this year, though, the metal has moved in tandem with riskier assets like equities and oil.
Spot gold fell 0.8 percent to $1, 5780.25 an ounce, having earlier hit a low of $1,574.29, its lowest level Jan. 3. For the week, gold lost 3.7%, the worst performance since the week of Dec. 18 last year when it plunged nearly 7 percent.
U.S. gold futures lost $11.50 at $1,584 an ounce. According to preliminary data provided by Reuters, trading volume rose above its 30-day average for a fourth session.
The SPDR Gold Trust (ETF) (NYSE: GLD) ended the day 0.77% lower at $153.57.
Right throughout the week, the political chaos in Greece and leadership change in France kept investors on the edge as they map out possible outcomes from the current crisis.
While no political consensus appeared building in Greece until Friday, threatening worsening of crisis; investors now will keep a close eye on next week’s meeting between France’s newly elected President, Francois Hollande and Germany’s Chancellor Angela Merkel.
The meeting will focus on deciding the future course of action in the euro-zone, aimed at boosting growth. However, any sort of minor disagreement could have serious repercussions on the market.
Francois Hollande, a socialist leader believes that severe austerity measures have thrown euro-zone under recession, resulting in large scale unemployment, Angela Merkel on the other hand wants the member nations of monetary union to strictly adhere to the euro-zone fiscal-pact.
Euro-zone’s debt concerns were further fuelled by struggling banking sector in Spain. Earlier this week, the Government of Spain, took a big a stake in Bankia-one of the biggest banks in the country. The move was aimed at shoring up investor’s confidence in Spain as country grapple with high fiscal debt amid rising cost of borrowing on its debt.
Commenting over huge sell-offs among all riskier asset categories, Anthony Neglia, president of Tower Trading and a COMEX gold options floor trader, said to Reuters-CNBC, “Everybody’s looking in Europe trying to figure out what’s going on there, so you are not getting a tremendous amount of interest in any asset class.”
Neglia also added that there was a lack of aggressive buying of put options to hedge against downside risk despite gold’s heavy losses this week.
Weak Physical Gold Demand
Demand for physical gold in world’s biggest market, India- still remains fragile despite the scrapping of excise duties from Jewelry earlier this week. Weaker Indian rupee, higher import duties (which was almost doubled in March) and higher spot prices have curtailed the demand for the metal, according to dealers.
Nonetheless, some buying was seen in the United States, where sales of American Eagle gold coins stood at 31,500 ounces so far this month, already 50 percent more than was sold in the whole of April.
In some other precious metal markets, Silver edged lower0.4 percent at $28.87 an ounce.
Spot platinum fell 1.2 percent to $1,462.25 an ounce, while spot palladium lost 2.4 percent at $595.63 an ounce.
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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. |