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Gold Settles Higher on Euro Zone Optimism

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Gold prices settled higher in trading on Friday on optimism over the euro zone. Investors’ sentiment was lifted on Friday on hopes that Greece and private bondholders will soon strike a deal.

Gold rose on Friday even as the euro dropped; once again suggesting that the precious metal has broken ranks with the single currency. In the last two months of 2011, gold had tracked the euro. However, since the start of this year, the precious metal has risen nearly 6% even though the euro has been under pressure.


On Friday, gold gained as Reuters, citing banking officials, reported that Greece was nearing an agreement with its creditors. The deal could prevent the debt-laden country from defaulting on its debt.

Gold rose for a third straight week on Friday, however, analysts said investors remain cautious about the metal it briefly entered into bear market territory last month.

David Meger, Director of Metals Trading at Vision Financial Markets, told Reuters on Friday that the expectation of a Greek debt agreement certainly takes the dark looming cloud of the market. Meger further said that gold and most notably silver are both having technical breakouts, which are indicative of strong physical demand in the market.

Spot gold rose 0.3% to $1,662 an ounce on Friday. Gold futures for delivery in February on the Comex division of the New York Mercantile Exchange rose $9.50 to settle at $1,664 an ounce.

Gold ETFs also ended higher in Friday’s trading session. The SPDR Gold Trust (ETF) (NYSE: GLD) ended the day 0.53% higher at $162.07, the Market Vectors ETF Trust (NYSE: GDX) ended the day 0.06% higher at $52.18, and the iShares Gold Trust (NYSE: IAU) ended the day 0.50% higher at $16.24.

Analysts say that low interest rates, strong physical demand from China and India, concerns about inflation and the debt crisis in the euro zone are all lending support to gold, however, the precious metal could face some tough headwinds ahead.

David Jollie, analyst at Mitsui & Co. Precious Metals, told Reuters on Friday that there are lot of reasons still to buy gold, but it is fair to say that with risk fatigue setting in, a little bit of price sensitivity coming through, and the dollar likely to show some strength, the gains for gold in the current environment are probably less exciting than they were.

Silver prices soared on Friday, with spot silver rising 3.7% to $31.67 an ounce. Vision Financial Markets’ Meger said that physical silver demand has risen in recent weeks, driven by retailers chasing better price momentum.

According to data from U.S. Mint, sales of silver American Eagled totaled 5.3 million ounces on Friday.

The iShares Silver Trust (ETF) (NYSE: SLV) ended the day 4.98% higher at $31.22, and the ProShares Ultra Silver (ETF) (NYSE: AGQ) ended the day 9.88% higher at $55.51.

The ProShares UltraShort Silver (ETF) (NYSE: ZSL), which takes a short position on silver, ended the day 10.19% lower at $11.46.

In other precious metals, spot platinum rose 0.8% to $1,527.49 an ounce, while spot palladium rose 0.7% to $669.78 an ounce.

In a research note, UBS said that the gap between platinum market fundamentals and investor sentiment remains wide. UBS said that while the outlook for industrial demand does not appear bleak, investors are cautious. UBS deems prices around $1,400 an ounce as attractive. The bank maintains its cautious outlook on PGMs as a whole and shifts its relative preference away from platinum this year, given its larger exposure to Europe and the potential supply overhang from ETFs.

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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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