By Murray Coleman
Gold and silver ETFs
tracking spot prices are sliding Tuesday, weighed down by a resurgent
U.S. dollar which regained some momentum after S&P’s ratings arm
warned it might downgrade 15 euro-zone nations. Also, German officials
were using the credit threat as a call-to-arms, urging euro-zone leaders to act quickly at a summit in Brussels later this week.
The SPDR Gold Trust (GLD) most recently was down 0.63%. Meanwhile, the iShares Silver Trust (SLV) was falling by 0.20%. Miners were mixed: The large-cap focused Market Vectors Gold Miners ETF (GDX) was down 0.41% and its cousin Junior Gold Miners ETF (GDXJ) was slumping some 1.25%. The Global X Silver Miners ETF (SIL) was dropping by 0.57%. A leading component, Plains All American Pipeline LP (PAA),
was holding up better than most. It was down 0.40% as analysts remained
bullish on the master limited partnership’s purchase of BP’s Canadian
natural-gas-liquids pipeline business for $1.7 billion.
The deal, announced last week, will make PAA the largest player
in Canada with control over a third of the country’s NGL volumes,
analysts at Scotia Capital estimated. The bank in a note to clients
yesterday added that PAA’s ability to move more into U.S. hubs may
increase producer profits but cut into the margins of other pipeline
companies.
Gold for February delivery, the most active contract on the Comex,
was off by $21.10 to $1,713.40 an ounce. March silver was down 50 cents
at $31.88 an ounce.
Precious metals had moved lower in pre-markets on signs of more progress in Europe
as leaders huddled ahead of Thursday’s summit in Brussels. Gold prices,
in particular, weakened as the dollar strengthened after S&P’s
warning, which impacted other commodities denominated in the greenback.
The PowerShares U.S. Dollar ETF (UUP)
was most recently up 0.1% in choppy trade. With word that S&P could
downgrade ratings on Germany, France and 13 other euro-zone countries —
typically such decisions come within 90 days — precious metals traders
were concerned that further financial deterioration in Europe could
cause more investors to move to cash and sell-off positions in gold.
“It appears that gold prices are more closely influenced by
risk-related trading than by currency-led trading or safe-haven buying,”
HSBC analyst James Steel said in a note.
He added: “There is still a liquidity squeeze. Until this eases, gold may stay on the defensive.”
Some were also worried that euro-zone issues were already weakening
demand. “Much of the demand weakness is from India,” said Standard Bank
in a note. He pointed to a weakening Indian rupee, which has helped to
push local prices of gold to record highs this month. That has limited
consumption by the world’s top gold jewelry consumer, according to a Dow
Jones Newswires report.
It’s also likely that enthusiasm for buying gold and silver will
remain cautious ahead of the summit starting Thursday in Brussels.
European leaders are hoping to forge a new agreement that will call for
more widespread austerity throughout the region’s budgeting process.
