Gold Prices Slip
Gold Prices fell on Friday, taking the deepest weekly plunge since mid- December following a sharp rise in the U.S. dollar.
The greenback’s strength- which reached to 9 months high against the yen coupled with sharp gains against the euro– prompted sell off pressure on bullion as the metal move inversely to the greenback as non-U.S. investors can achieve more of a profit on their bullion holdings than in their own currencies.
Meanwhile, Fed’s Chairman, Ben Bernanke issued a downbeat assessment for the U.S. economy; and he further ensured market participants that the Central bank is committed to keeping the benchmark interest rate at record near zero levels until late 2014, aimed at boosting lending and liquidity in the market.
Analysts believe that with no further commitment shown by the Fed on quantitative easing or no anchoring long term bond yields to promote growth, resulted in the biggest sell off of the metal, since past 2-1/2 months.
Nevertheless, it is also believed that gold has enough positive drivers to uphold the market over the coming year, which could see the price leaping to a new high.
While Spot gold was losing 0.31 percent, closing the day at $1,712.10 an ounce, U.S. gold futures for April delivery fell 0.46 percent to settle at $1709.80.
Earlier in the trading session, gold had its biggest weekly plunge since mid-December, dropping 0.4 percent.
Commenting on the gold prices volatility, Mark O’Byrne, director at online bullion market GoldCore told Reuters “In the shorter term, we could see further weakness and we do advise our clients not to try to catch a falling knife”. He also added “We would wait until we have more clarity about the shorter-term outlook, but our medium- to long-term outlook is still positive on gold.”
Barclays Capital also seems to hold the same notion. In its note to the investors the bank stated “The broader macro backdrop remains gold-favorable, given the negative interest rate environment, longer-term inflationary concerns, and lingering sovereign debt uncertainties”.
The note also commented “But dollar strength, broad risk reduction and profit-taking could pose near-term hurdles for gold”.
Earlier this week, the ECB decision to inject half-trillion euro cash in the form of cheap three-year loans to commercial banks should, in the longer term, provide support to gold as it helps anchor euro zone lending rates, believes many analysts.
It is also believed that ECB’s massive cash injection this week (LTRO) made it more attractive to use the euro as a funding currency to buy higher yielding assets.
Gold priced in euros gained 0.4 percent on the day, settling at 1,294.23 euros an ounce; however the metal was still set for a 1.8 percent loss this week.
The SPDR Gold Trust (ETF) (NYSE: GLD) fell marginally on Friday, ending the day 0.12% lower at $166.36.
In some other metal markets, Platinum having lost just 0.4 percent in value this week was dropping 0.19 percent, closing at $1,692.99 an ounce.
Palladium also dropped 0.57 percent to $710.47 an ounce, even as silver shed 2 percent to $34.73 an ounce.
The iShares Silver Trust (ETF) (NYSE: SLV) ended the day 1.95% lower at $33.77.
In the recent past platinum has gained sharply over supply chain disruptions emanating from south Africa-world’s biggest producer of platinum along with the growing demand for the metal in recovering U.S economy.
Now the spotlight remains on Impala Platinum, the world’s second-largest platinum producer. The company has suffered 120,000 ounces of lost production in a six-week-long strike at its key Rustenburg mine.
Although operations there are set to restart next week, the company said it was still uncertain when full production would be regained.
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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. |