Stock Market Watch

Gold Prices Settle Higher

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Gold Prices finished the day higher, settling at around $1,568 an ounce as euro retreated amid growing speculation that euro zone countries will push forward the mutualized debt proposal while data showing surprise jump in consumer sentiment in Germany and France also helped the common currency to extend gains.

The correlation of gold to the euro/dollar exchange rate held close to its highest in a month.  Any sideways drift in the euro-zone’s common currency was more likely to see a similar movement in gold than as recently as two weeks ago.


Lately, amid heightening debt crises in the euro zone and deepening fragility in Spain’s banking sector, the yellow metal has borne the maximum brunt as edgy investors preferred cashing  long positions on bullion in order to cover looses from  riskier assets like equities, oil, other precious commodities.

European investors are also more likely to sell their gold when the euro edges down against the dollar to earn a higher profit on their currency position by taking profit on their dollar-denominated bullion position.

On Friday, Spot gold inched up 0.9 percent at $1,572.36 an ounce Friday, having earlier fallen as low as $1,533.41 on the backdrop Greece crisis. However, the metal lost about 6% on the May.

Gold futures for June delivery climbed up $11.40 to settle at $1,568.90 an ounce.

The SPDR Gold Trust (ETF) (NYSE: GLD) ended the day 0.84% higher at $152.68, the Market Vectors ETF Trust (ETF) (NYSE: GDX) ended the day 0.63% higher at $44.91, and the iShares Gold Trust (ETF) (NYSE: IAU) ended the day 0.86% higher at $15.32.

Reflecting over gold’s possible price movement, Lynette Tan, an analyst with Phillip Futures in Singapore, said to Reuters, “ I think gold will continue tracking the euro for the moment and ignoring its own fundamentals as macro sentiments overwhelms investors.”

“For the moment, I am downside biased for gold with support at $1,520 levels and the psychological $1,600 as key,”  predicted Tan.

Meanwhile in the U.S. any outside chance of further monetary easing was dashed following a data on U.S. consumer confidence for May, which was at its highest since October 2007 even as a data on latest weekly jobs claims indicated that the economy was coasting along slowly but surely.

Although gold prices recovered due to climbing euro, expecting a bullion rally at this stage will be not the right idea. The euro is still wobbly, weighed by some unresolved issues in the currency bloc and any sort of negative news or statement will spark the selloff of euro.  The euro had hit its 21 month low against the dollar, earlier during the week.

Commenting over euro’s future, Peter Morici, an economist at University of Maryland, said to Reuters-CNBC, “The euro was a bad idea with the best intentions, and now the sensible course for all involved is to cut their losses and return to the sanity of national currencies.”

Morici also believes that should Greece exit from the bloc, the risk of contagion spreading to other vulnerable countries might well mean the end of the euro.

“The euro has failed, and the time has long passed for Greece to bail out. Sooner or later, Spain, Portugal and perhaps Italy and Ireland, will have to follow, but after the world does not end with Greek withdrawal, those would be easier and less painful decisions to manage,” added Morici.

In some other precious metal markets, silver gained 0.81%, to settle at $28.38 an ounce.

Platinum edged up to $1424.7 an ounce while sister metal Palladium also climbed up to $589.95 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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