Gold on Euro Fears, Fed Stimulus Hopes Posted by James Randolph on March 28, 2013
The spot price of gold gained $6.52 or 0.33 percent to $1,605.40 per troy ounce by the end of Wednesday trade as U.S. gold futures for June delivery gained $9.90 or 0.61 percent to $1,607.40 per troy ounce. Thursday saw a slight reversal with the price of gold drifting $8.52 or 0.55 percent on the spot market to $1,596.45 per troy ounce. U.S. gold futures for June delivery also shed some ground at $9.90 or 0.62 percent to $1,598.90 per troy ounce.
With Wednesday’s gains occurred as worries in the Eurozone and concurrent hopes of stimulus from the Federal Reserve lifted physical demand in precious metals.
U.S. equities lost ground in Wednesday trade after weak demand at an Italian debt auction stoked fears about the financial health of the Eurozone, but a recovery on Thursday contributed to pressure on the precious metals.
Most recently, following the decision of the Cyprus parliament to tax deposits in bank accounts, the Cypriot government has implemented capital flow controls in order to avert a run on banks, which have been reopened. Accounts of more than 100,000 euros may be taxed by up to 40 percent and Cyprus has placed a 300 euro limit on cash withdrawals.
The events in Cyprus have stoked fears that similar plans and proposals may be enacted in other Eurozone economies. The entire situation has been renewing and advancing physical bullion demand in another push to precious metals on the part of investors seeking safe haven from current market conundrums.
Gold is in line to rise around 1.7 percent in March on the safe-haven demand and the hopes for a prolonged stimulus effort from the Federal Reserve. Two top Federal Reserve policymakers have said the U.S. central bank should continue its bullion-friendly bond-purchases at least through 2013, increasing prospects for gains in gold. The Federal Reserve’s stimulus policy has been very beneficial to gold, which benefits as a tangible commodity retaining its value in the face of inflation.
Trading volume on U.S. gold futures for April delivery came in around 20 percent above the 250-day moving average, partly because of the April-June contract rollover ahead of the first-notice day on Thursday, according to Reuters.
Market effects from the news out of Cyprus and the recent indications from the Federal Reserve have had a relatively muted affect on the price of gold, which still needs to break through the technical resistance at last week’s high of $1,616.50 per troy ounce in order to advance further.