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Gold Prices Finish Higher

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Gold prices closed higher, inching towards $1,600 an ounce level as investors’ anxiety was tad abated by political developments in Greece, with formation of the coalition government expected by next Sunday even as bargain hunters capitalized on low prices, supporting the metal’s lower range level.

Meanwhile, market sentiment also improved as stress in Spanish debt market eased following country’s center right Government’s initiative to shore up its struggling banking sector, exposed to bad loans and moribund property market. Euro zone nations also approved a new bailout package of 5.2 billion euro to Greece, a move hinting at monetary union’s commitment towards staying intact.


With some calmness settling down in the euro-zone, the euro was quick to pare its some loses against the dollar. Earlier euro dropped to its 31/2 month low against the dollar, as renewed concerns of debt crisis unnerved investors’ confidence towards the monetary union.

Dollar has a negative relationship with gold. As most commodities, including gold are traded in dollars, any weakness in dollar increases the demand for the metal, as it become cheaper for those traders who deal in currencies other than the dollar.

Spot gold inched higher 0.33 percent to $1,595.70 an ounce, off a four-month low of $1,579.30 hit in the previous session.

U.S. gold futures for June delivery climbed up $1.30 an ounce at $1,595.50, with trading volume largely in line with its 30-day average, in line with a recent stronger trend, according to a data provided by Reuters.

The SPDR Gold Trust (ETF) (NYSE: GLD) ended the day 0.19% higher at $154.76.

However, gold prices yanked 3% this week due to heavy selling pressure. Any announcement from fed concerning quantitative easing or bond buying program seems highly unlikely as series of better than expected economic indicators will not prompt the central bank to increase the money supply.

On Thursday, a data from U.S. Labor Department showed that weekly jobless claims fell by 1000 for the last week.

Normally, gold is perceived as safe haven asset, a hedge against economic uncertainties; however, this year it has moved in tandem with riskier assets like dollar, commodities and oil.

The yellow metal has lost $190 an ounce since last February, when expectations of monetary easing from fed boosted its price.

Commenting over gold’s sharp slide, Suki Cooper, precious metals analyst at Barclays Capital, said to CNBC-Reuters, “Gold has behaved closer to risky assets rather than differentiating itself as a safe haven asset and has been winded by the possibility of further quantitative easing being scaled back.”

“Weak physical demand from key gold consumers India and China also failed to boost prices” added Cooper, lowering her 2012 gold and platinum forecasts.

Gold’s Physical Demand Mixed in Asia

While a data from China on Wednesday showed that gold imports from Hong Kong to mainland China soared in April, India’s trade report for April showed that country’s gold import for April shrunk to $3.1 billion, down from $4.7 billion a year ago.

The demand for gold in world’s biggest market India fell sharply as weakness in Indian rupee, higher import duties and high spot prices, curtailed buying orders. However, Indian Government’s decision to scrap excise duties on jewelry- which was imposed in March- can boost the demand.

Spot silver settled down 0.17 percent to $29.17 an ounce, recovering from its four-month low of $28.60 hit in the previous session. The RSI reading for silver edged below 29 earlier in the day, its lowest in more than seven months. Any reading below 30 suggests that the metal has been oversold.

The gold/silver ratio- a gauge on silver ounces needed to buy an ounce of gold- rose to its highest in nearly four months on Thursday.

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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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