GOLD PRICE NEWS – The gold price moved lower Tuesday, trading off
$17.00 at $1,706 per ounce.
Analysts at Canadian-based Stifel Nicolaus
noted that “Physical demand is slowing
ahead of Euro summit.”
All eyes continue to be on Europe and the
summit set to take place on December 9 among European leaders.
S&P
500 stock futures traded near unchanged at 1255.60 while the price of gold
and broader commodities complex were lower across the board.
Oil and
copper fell 0.4% and 2.2% to $100.58 per barrel and $3.53 per pound,
respectively.
On Monday, the gold price began the week on a sour note, falling
$19.80, or 1.1%, to $1,722.80 per ounce. The spot price of gold
oscillated between gains and losses in morning trading, but turned
sharply lower as the U.S. dollar rallied against the euro. The
greenback’s rebound stemmed from a warning by Standard & Poor’s that
six AAA-rated European nations were at risk of a sovereign debt
downgrade.
Silver declined alongside the gold price following the S&P
headlines, sinking 1.7% to $32.01 per ounce. Other precious metals
headed south as well, with platinum dropping 1.7% to $1,522.50 per ounce
and palladium retreating 2.0% to $633.10 per ounce. Cyclical
commodities posted more moderate losses as crude dipped 0.3% and copper
slid 0.8%.
Gold shares initially climbed in concert with the broader equity
markets, as the AMEX Gold Bugs Index (HUI) rose as much as 2.0% in
morning trading. However, the sector surrendered its gains following
the S&P news and the HUI finished lower by 0.8% at 561.03. Barrick Gold
(ABX), the world’s largest gold producer, closed down by $0.75, or
1.5%, at $50.27 per share. Newmont Mining (NEM), the largest U.S.-based
gold miner, settled with a loss of $0.69, or 1.0%, at $66.34 per
share. Gold mining stocks traded lower early Tuesday on the back of
lower gold prices.
While Standard & Poor’s warning rattled the gold price and gold
equities, the ratings agency later placed all 17 nations in the euro
zone on “credit watch negative” – representing a 50% chance of a
downgrade within the next 90 days. The move came despite an encouraging
meeting between French President Nicolas Sarkozy and German Chancellor
Angela Merkel. The top officials in France and Germany agreed on a
proposal to implement amendments to Europe’s governing treaties to
provide stricter economic governance for the entire euro zone. The
proposal is expected to be presented to the entire European Union at a
summit in Brussels on Friday.
Commenting on the implications of the euro zone developments for the
gold price, analysts at Commerzbank wrote in a note to clients that
“Friday’s European Union summit is the most important meeting over the
next few days, though we can expect a long wait before a permanent
solution to the crisis is found.”
While the summit contains considerable uncertainty for the price of
gold, according to Commerzbank, the firm contended that Thursday’s
European Central Bank (ECB) meeting is likely to be a bullish factor for
the gold price. The consensus view among economists is for the ECB to
lower its benchmark interest rates by 25 basis points to 1.0%. “This
should lend support to the gold price since the opportunity costs of
holding gold will remain low,” Commerzbank stated. “That said,
speculative financial investors are still showing reticence and for the
second week running moderately cut their net long positions in the week
to Nov. 29.”
In the U.S., Chicago Fed President Charles Evans stressed the need
for additional stimulus in a speech on Monday. “There is simply too
much at stake for us to be excessively complacent while the economy is
in such dire shape,” Evans argued. “It is imperative to undertake action
now.”
Last month Evans expressed concerns that Europe’s sovereign debt
issues could have significant spillover effects on the U.S. economy. By
reiterating his ultra-dovish outlook yesterday, Evans indicated that
the crisis has escalated further in recent weeks and therefore warrants
further accommodative monetary policies – measures that could provide
further support for gold prices.
