Stock Market Watch

Gold Prices Settle Lower

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Gold prices recovered somewhat after sliding more than 1 % on Thursday.  The sell off pressure was also seen on other riskier assets like euro, oil and equities as investors booked profits before the end of the quarter. Nevertheless, analysts believe that prices will remain more or less in the same range for now as counter-balancing factors and conflicting economic data offset each other.

According to David Meger, director of metals trading with Vision Financial Markets in Chicago, “There’s a bevy of conflicting information that everyone is trying to digest. So, on the back of that you’re seeing a little fade to the market, but the dips remain buying opportunities”.


Spot gold edged down 0.4 percent, settling at $1,656.46 an ounce, for a third session of losses. Earlier, it had plunged to its lowest since March 23 at $1,646m, after rallying on Tuesday to a two-week high when Federal Reserve chief Ben Bernanke hinted that further monetary easing is one of the options to bring down the unemployment levels.

U.S. gold futures were sliding $5.60 an ounce to end the day at $1,654.90.

Commenting on downward movement of the bullion market, Meger said to Reuters “You see concerning signs about the U.S. economy, China’s slowing growth pace weighing, the European economy weighing and here you are sliding back down to the $1,640 area”.

Even though Meger and many others believe that gold prices to hold in sideways pattern, there is growing fear among some analysts who believe that the metal could break below $1,650 an ounce.

In an interview with Reuters, Nic Brown, head of commodity research at Natixis, said “We have a forecast for an average price for the year of $1,450, so we are not surprised that gold prices are struggling to go higher”. He also added “We think as time goes on the likelihood is that prices will probably soften further”.

Meanwhile, gains in the dollar also exerted selling pressure on bullion. The euro slid against the dollar and the yen as nervous investors dumped the single currency ahead of Spain’s budget presentation at the end of the week along with ongoing concerns about the euro-zone sovereign debt crisis.  Prices of dollar and gold are inversely related. Stronger dollar tends to weigh on the metal as most commodities’ trade is dominated in dollars.

Market participants are also eyeing developments in world’s biggest physical gold buyer-India. Traders and Jewelers entered strike for the 13th day, as their demand for a rollback on import duties on gold is unmet.

According to Nic Brown, if significant declines are seen in demand for gold from India then it “will be a major negative for the market”.

The Swiss bank, UBS has also cut its 2012 average gold price forecast to $1,680 an ounce from $2,050 previous estimations.  In its note to investors the bank wrote, “As acute macro stresses abate, investors are looking at other asset classes and to the growth story once again. Gold is moving off the center-stage position it occupied for most of last year”.

Gold ETFs ended on a mixed note on Thursday. The SPDR Gold Trust (ETF) (NYSE: GLD) ended the day 0.14% lower at $161.28, the Market Vectors ETF Trust (NYSE: GDX) ended the day 0.31% higher at $49.09, and the iShares Gold Trust (ETF) (NYSE: IAU) ended the day 0.06% lower at $16.19.

In some other precious metals markets, silver edged up 0.04 percent at $32.05 an ounce, paring early losses after falling to $31.61 an ounce.

While Spot platinum edged off 0.5 percent to close at $1,623.70 an ounce,  palladium lost 0.1 percent , settling at $641.42.

 

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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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