Gold Holds Levels, Weaker Euro, Stocks Weigh Posted by James Randolph on July 20, 2012
July 20, 2012 – Gold dropped under $1,580 per troy ounce Friday as weakness in the euro and
in stock markets diverted interest from the gold market. Gold began a trajectory for
a weekly loss as investors also coped with the latest indication that new measures for
stimulus to aid the US economy are not in our immediate future.
According to Reuters, short-term investors who make trades on relatively small
price intervals have come to dominate the gold market, which has contributed to keep
gold range bound for the past three weeks, this week included. This is the most narrow
band gold has traded in within the last three months.
The gold market is also coping with historically slow physical demand from one
of the largest gold markets on the planet, India, which has made building on gains in the
gold market difficult.
Analysts with Citigroup point out that, with the collapse of the rupee, gold prices
in India are still close to historical record highs, which are cutting out the Indian jewelry
The largest gold-backed exchange-traded fund in the world, New York’s SPDR
Gold Trust, registered a nine ton drop in its holdings Thursday, which constitutes the
biggest one-day drop since May 22 and brings its total gold reserves to a six-month low.
Speculative demand is not picking up the slack in the ETF market at the moment,
partially attributable to skepticism over a round quantitative easing in the US.
The spot price of gold was down 0.2 percent at $1,578.80 per troy ounce, while
US gold futures for August delivery, the most popularly traded contract, were down
$2.20 per troy ounce at $1,578.20.
Following an appearance by Ben Bernanke before the US Congress Tuesday
in which he gave no hint of further quantitative easing, gold fell back quickly from
the week’s highs. Many investors read Bernanke’s testimony concerning the state and
prospectus of the US economy as decidedly gloomy. However, Bernanke did not give
any clues as to an imminent round of US fiscal stimulus.
Investors anticipated stimulus because it is very advantageous to the gold market.
Even investors who are concerned about the effect of inflation and general effects of
increasing the monetary supply through stimulus look forward to quantitative easing for
its rapid returns in the gold market.