Stock Market Watch

Gold Prices Settle Higher

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Gold prices edged lower on Wednesday, extending loses for second straight day as U.S. equities and other commodities traded on loses following the release of disappointing ADP job and factory orders data. Meanwhile, the risk of debt contagion spreading to the Netherlands along with worse than expected data on euro-zone’s PMI reignited investors’ concerns over euro-zone financial health, putting pressure on euro.

Spot gold edged down 0.5 percent, to settle at $1,652.80 an ounce.


U.S. gold futures lost $8.40 an ounce at $1,654. According to a preliminary data provided by Reuters, Trading volume was 20 percent below its 30-day average.

Even though bullion is considered as a safe haven investing instrument, it has tracked riskier assets like equities, oil and other commodities, lately. Pressure was built on gold just after the ADP job data release- which showed only 119,000 private sector jobs were created in April, whereas economist were expecting 170,000 additions in the same period. The sentiment towards gold further weakened when data on U.S. factory orders for March showed 1.5% contraction- a biggest plunge in last three years.

Normally, weakness in economic indicators augurs well for gold, as central bank eases its monetary policy to boost the economy. However, according to some market watchers, it will be highly unlikely that fed will provide any economy stimulating measures like bond buying program to pump-up the stalling U.S. economy any time soon.

Now, gold investors are eyeing all important data on U.S. non-farms jobs, slated to be released on Friday. The data will help in providing some cue on whether fed will continue its record low benchmark interest rate until 2014 and will it provide some more quantitative easing measures before Q4.

Since last two months, gold has traded on a very tight monthly spread, remaining firmly in the range of $1,620 and $1,670 an ounce level. The metal has lost almost $125 an ounce since February 28 as series of strong economic indicators and no hint on quantitative easing from the Federal Reserve, took of the sheen from bullion market. In February, gold touched its year to date high of $1790 an ounce.

While giving remark over Gold’s failure to surpass the current narrow range, Pradeep Unni, analyst at Richcomm Global Services said to Reuters, “With economic data throwing mixed signals, it is most likely that gold will continue to wobble in a narrow range, at least until there is clarity on the jobs front.”

Another factor behind gold’s continuing in a tight range is the sluggish physical demand for gold from Asia- especially India. Despite wedding season and Hindu gold buying festival in April, the demand remained meek from world’s largest importer of gold.

Consumers in India were deterred by high gold prices, weakness in Indian rupee and poor consumer sentiment as country grapples with high fiscal and trade deficits and slowing economy.

However, some appetite returned for gold coins in May, with the U.S. Mint reporting sales of 10,000 ounces on the first day of the month, the number of coins sold on one day were equal to the total sold in the whole of April. April was the by far the worst month for gold coin sales since June 2008.

However, according to a data provided by Reuters, holdings of gold-backed exchange-traded funds , which issue securities backed by physical gold and proved a popular investment during the financial crisis, fell by 194,000 ounces in April and dropped down to 70 million ounces on Tuesday for the first time since Feb. 2.

The SPDR Gold Trust ETF (NYSE: GLD) ended the day 0.45% lower at $160.60.

Among some other precious metal markets, silver edged lower 0.47%, to close at 30.50 an ounce. Platinum also lost 0.15%, to settle at $1,562.10 an ounce.

 

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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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