Gold Drifts on Dollar Gains, Stocks Continue Losses Posted by Brian Ford on September 26, 2012
September 26, 2012 – The price of gold dropped below $1,760 per troy ounce on Wednesday as a stronger dollar combined with weaker stocks and commodities, though the monetary easing recently announced by the central banks including the U.S. Federal Reserve stopped it from dropping any further.
Concern continues over the euro zone debt crisis while Greece endured the largest anti-austerity strike seen in months and the central bank in Spain suggested the economic situation in the country may be degrading and the recession may be deepening. European shares and crude oil futures were sharply lower on the news.
Spanish bond yields breached the 6 percent level on Wednesday following developments that reduced expectations for Madrid’s ability to request a bailout and secure central bank aid for the country’s troubled balance sheet.
The euro hit a two-week low against the dollar as investor sentiment dropped amid very popular opposition within the euro zone to the budget austerity in a market already worried about weak global growth outlook.
The spot price of gold drifted 0.1 percent to $1,758.64 per troy ounce as U.S. gold futures for December delivery dropped $3.50 to $1,762.90 per troy ounce.
BNP Paribas analyst Anne-Laure Tremblay points out that after rising rapidly between mid-August and mid-September, gold is in a period of consolidation. She believes that in the short term we could see a limited correction before the price resumes its ascent.
Tremblay also said that the U.S. dollar has been strengthening against the euro, which is likely putting pressure on the price of gold. Other than that current dynamic, the gold market is just taking a breather, in Tremblay’s analysis, as it is not far off the $1,800 per troy ounce level at which there is a strong resistance.
This month, the Federal Reserve, the European Central Bank, and the Bank of Japan have all unveiled bond-buying programs to loosen monetary policy.
The price of gold hit 6-1/2 month highs Friday on the expectation that the movement in the Western world toward an even looser monetary policy would benefit the bullion market by keeping long-term interest rates low, increasing the opportunity cost of holding gold bullion, while also increasing liquidity levels and increasing concerns over inflation.