Stock Market Watch

Gold Prices Tumble

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Growing concerns over global economy pushed back gold prices to a six month low on Tuesday. Besides, equities and crude oil prices retreated as market sentiments turned nervy.

Gold for April delivery fell $31.80, or 1.9%, to close at $1,672.10 an ounce on the Comex division of the New York Mercantile Exchange.  Yesterday’s gold settlement was the lowest since January 24, as the metal ended below the $1,700 level.


Although, bullion gained 6.7% so far this year, it lost 2.3% to date in this month.

On Tuesday market participants treaded with caution as gloomy global economic situation emerged from several quarters during past 2 days. While China revised its growth target to 7.5% from an original estimate of 8%, business activities data from Europe and The U.S also showed contraction. Meanwhile several riskier assets faced the selling pressure as one banking trading group sounded warning about Greece’s debt crisis. According to a report carried by Reuters, The Institute for International Finance, a banking group that helped negotiate the terms of the bond swap, in its report, reportedly warned that a disorderly default by Greece could result in at least 1 trillion euros ($1.32 trillion) in damage to the euro-zone economy.

Besides, a gain in dollar also kept the selling pressure on most metals.

Those metals that are closely related to industrial activities had an even harder time than gold on Tuesday, with palladium plunging the most on a day.

The June contract fell $35.35, or 5%, closing at $671.60 an ounce.

Sister metal platinum also fell yesterday, with April platinum shedding $50.70, or 3.1%, closing at $1,611.90 an ounce.

Platinum has gained in recent times mainly due to a strike in the world’s largest platinum mine, Impala Platinum’s Rustenburg mine, in South Africa.  Although mining resumed from Monday, uncertainty over production remained.

Meanwhile, silver for May delivery fell 91 cents, or 2.7%, closing at $32.78 an ounce, a six-week low for the metal.

May futures for copper also shed 12 cents, or 3.2%, to settle at $3.74 a pound. Yesterday’s drop was steepest one day percentage loss for copper since mid-December.

In the currencies market, the U.S. dollar index which measures the greenback against a basket of six other widely traded currencies, reached to 79.823 from 78.309 late Monday, prompting selling pressure on most commodities.

A rising dollar puts a downward pressure on dollar-denominated commodities, as it makes them more expensive for holders of other currencies.

Will gold slip further?

According to a report from R J O’Brien, an independent futures brokerage and clearing firm in the United States “The gold market could be seeing some fresh pressure from news of lower gold flows from Hong Kong into mainland China for the month of January, especially since some traders might link that story with disappointing Chinese growth targets for 2012,” the report also added “Another issue that is seemingly applying some pressure to gold prices is talk of further slowing in eurozone manufacturing.”

The brokerage firm has warned that things could get worse in the coming days. “A slide down to $1,650 “can’t be ruled out in the coming days, especially if the macro economic outlook remains negative and profit taking becomes the ruling theme in the marketplace,” cautioned O’Brien.

Gold ETFs also fell sharply on Tuesday. The SPDR Gold Trust (ETF) (NYSE: GLD) ended the day 1.77% lower at $162.71, the Market Vectors ETF Trust (NYSE: GDX) ended the day 2.18% lower at $52.45, and the iShares Gold Trust (ETF) (NYSE: IAU) ended the day 1.92% lower at $16.31.

The iShares Silver Trust (ETF) (NYSE: SLV) ended the day 3.06% lower at $32.02.

 

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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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