Gold Drifts with Euro, Commodities Posted by James Randolph on June 28, 2012
June 28, 2012 – Gold, pressured by weakness in the euro currency and other commodities, drifted slightly lower on Wednesday as expectations for this weekend’s European Summit continued to wane, according to Reuters.
The spot price of gold was down 0.3 percent at $1,566.70 per ounce in early trading while US gold futures for August delivery were down $7.60 at $1,567.30 per troy ounce.
Prices see strong support at $1,558, according to analysts, which is the low gold reached last week following the Federal Reserve’s disappointing decision to hold off on aggressive stimulus.
“Unfortunately we are in a situation when you get debate on debate (on Europe), but no real material change,” Deutsche Bank analyst Daniel Brebner said.
“We’re in a bit of a period over the summer when we are going to see very little meaningful action by policymakers in three key regions—Europe, the US, and China—and I suspect we will have a continued deterioration in economic indicators. That means pressures in the gold market will continue to mount.”
“I don’t think there’s any kind of catalyst near term for a significant rebound in gold prices,” Brebner continued. “That said, I think we’ll continue to see very steady buying by central banks, which have been in the market for the last couple of quarters or so. That should help gold prices from weakening too much.”
Turkey, Russia, Kazakhstan and Ukraine are among the latest countries with central banks raising gold reserves, IMF data revealed on Tuesday.
Gold moved in correlation with the so-called “risky” assets, including oil and equities, through the year and has been responding to the fears over the Eurozone crisis.
“Bullion could still suffer from a relatively stronger US currency, as gold’s safe-haven appeal is failing to attract enough followers as players are going for the dollar or Treasuries,” VTB Capital wrote.
Gold demand continues to be sluggish in India, one of the world’s major gold consumers, as Indian gold buyers remain on the sidelines.
Data from three major Mints in Europe and North America showed on Tuesday that gold coin sales dropped in the first quarter along with the strong demand for small investment products.