Gold Loses Ground Posted by James Randolph on June 29, 2012
June 29, 2012 – Gold dropped to a four-week low Thursday in market action that reflected more of a risk asset class than a safe haven asset class with major sentiment deriving from the pessimism about the European Summit to take place this weekend.
The European Summit, a two day Summit which was supposed to produce a equitable solution for the debt problems in the European Union and which is the twentieth meeting of European leaders to solve the debt crisis thus far, is expected to produce a broad roadmap for both financial and political union. The serious questions over the Summit’s capacity to accomplish this major political and financial feat is the doubt that is influencing markets.
German Chancellor Angela Merkel has already displayed a cooler attitude toward proposals backed by France for Eurozone nations to assume a joint liability for their mutual debts.
The spot price of gold was down 0.8 percent at $1,561.60 per troy ounce while US gold futures for August delivery were down $16.40 at $1,562.00 per troy ounce. Other markets registered the doubtful sentiment with the euro hitting a three-week low and shares in stock down.
After reaching a low of $1,554.59 per ounce just before the US open, the lowest price since June 1, gold quickly bounced back above $1,558 per troy ounce to find the support at its low of last week.
“Something needs to happen for gold to rally, and it’s not happening at the moment,” Citigroup analyst David Wilson said. “The chances are that Europe will continue to stick sticking plasters over the debt issue, so that will keep grinding on. It’s difficult to see what’s going to push gold up,” Wilson added.
Following a historical 11-year bull run, gold is in line for its largest quarterly loss in eight years and is nearly flat for the year to date.
Partially, the safe-haven status which has provided a great deal of buying demand for gold, has been chipped away as gold has been increasingly included into the wider commodity complex, with increased pressure down after the US Federal Reserve decided not to pursue aggressive monetary stimulus.
“There’s no semblance of a safe-haven at the moment but as the price goes lower that bid does come back as you maybe get some renewed investor interest—sovereign wealth funds and central banks looking to nibble away and even some physical buying,” SocGen analyst Robin Bhar said.