Certified Gold Drops On Greek, Chinese Concerns Posted by James Randolph on February 12, 2010
February 12, 2010 – Early trading today has seen certified gold drop while the US dollar rises against concerns about money tightening measures in China, as well speculative attacks against Greek bonds and labor union strikes over austerity plans by the government. By 9:00AM EST, the US Dollar Index was at 80.50, up 0.502, while gold stood at $1,085.80, down $7.80 on early trading.
Much of today’s climb by the dollar is seen as a market opinion that the EU plan for assisting Greece with its monetary crisis would fall short, and that investors will attempt to buy up large quantities of Greek bonds with favorable exchange rates, further damaging the economy. There is also concern that protests this week by Greek labor unions over government plans for cutbacks would disrupt efforts to control spending and further impact economic conditions in the struggling country.
Gold’s fall was as a reaction to both the rising dollar and the announcement from China that banks would be required to hold more money in reserve, limiting the amount of funds available for investment and effectively hindering demand for certified gold and other assets. China’s reserve requirement will increase 50 basis points effective Feb. 25, the central bank announced, as an effort to control inflation after flooding the market with additional funds in order to stimulate the economy.
“Gold is reacting to liquidity constraints implemented by the People’s Bank of China and a further strengthening of the dollar,” stated Bayram Dincer, an analyst at LGT Capital Management in Pfaeffikon, Switzerland.
A poll of 22 traders, investors and analysts taken by Bloomberg showed a largely favorable outlook for next week as 72% predicted certified gold prices would either rise or stay steady, with only 28% expecting a drop. Investors who take new positions today could stand to benefit should prices rise as generally expected.
Senior Staff Writer – Certified Gold Exchange