Gold Below $1,620 On Euro Retreat
Posted by Adam King on July 30, 2012
July 30, 2012 – Gold registered below $1,620 per troy ounce Monday on a weaker euro in
anticipation of the European Central Bank meetings this week. Speculation that the
European Central Bank will initiate new fiscal stimulus measures in order to bolster
the health and strength of the euro has greatly affected the currency as the Eurozone
continues to battle the debt crisis.
Gold gained 2.5 percent last week, the best weekly performance in eight weeks.
This action followed ECB President Mario Draghi’s pledge to do whatever is necessary
to prop up the euro.
The apprehension before the central bank’s meeting on Thursday, which is when
investors expect to see Draghi’s comments backed by action of some sort, has brought
the metal slightly off the recent highs. There is support, however, just below the $1,620
per troy ounce level, according to Reuters.
The spot price of gold drifted 0.3 percent to $1,618.09 per troy ounce as US gold
futures for August delivery also drifted down $.40 per troy ounce to $1,617.60 putting the Exchange-Traded Funds on track for a 1.3 percent gain in the month of July.
Consultant Peter Fertig with Quantitative Commodity Research believes that
after Draghi’s comments, the ECB will have to take some definitive action or it will have
endangered the euro. He also believes that such action will bring an upside breakout
for gold and silver, with resistance points at $1,670 to $1,700 per troy ounce. However,
should those levels get breached, gold could move toward the $1,790 level, according to
Fertig.
As the euro dropped 0.4 percent against the dollar, however, gold has been under
pressure as traders take a profit from last week’s gains.
Gold has been hindered this year by losses in the euro and gains in the dollar,
which have brought holding and initiation prices for gold higher in US currency and
curbed the appeal of gold as an alternative or a safe haven currency.
UBS, in a note, said that right now it is clear that the sentiment is turning in gold’s
favor, although the bank notes that despite the fresh inflow last week there is still some hesitancy in the market.
Categories:
US Gold Market
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