Gold Stabilizes near $1,585 Ahead of Summit Posted by James Randolph on June 27, 2012
June 27, 2012 – The price of gold stabilized over $1,580 per troy ounce in Europe Tuesday in anticipation of this week’s European Union summit which will provide a little more insight into how European leaders plan to deal with the sovereign debt crisis.
Prices have taken back some lost ground after sliding last week following disappointment with the Federal Reserve that had been expected to announce aggressive stimulus measure that would have super-charged the price of gold.
Despite recent economic data that points to an American economy in a precarious state, the Reserve did not find enough reason for more aggressive stimulus, choosing instead to extend Operation Twist. In response, the euro continues to fall after hitting a two-week low on Tuesday and the price of gold is correcting after the Reserve policy announcement.
The spot prices of gold changed little at $1,584.50 per troy ounce opening Tuesday after closing at $1,584.08 on Monday, though US gold futures for August delivery were down $3.40 an ounce at $1,585.00.
Spot silver is down 0.3 percent at $27.40 per troy ounce, with platinum and palladium also making slight dips.
“Gold is capped on the upside by disappointment post-Fed, while on the downside, we have some bargain hunting, and a bit of physical buying into the troughs,” SocieteGenerale analyst Robin Bhar said.
“We are stuck in a fairly small range here, in the $1,570-$1,600 area, certainly until the weekend when we will get to hear more on how the Eurozone will be [handled].”
The summit in Brussels, which is scheduled to continue for two days, from June 28-29, will be the 20th time EU leaders have met to try to resolve the European sovereign debt crisis since it began in Greece in early 2010.
Elevated risk aversion in the markets was attributed to a formal request from Spain for European funds and downgrade by the ratings agency Moody’s of 28 Spanish banks. Cyprus, also, is now the fifth Eurozone nation to request a bailout.
The euro has fallen, stock markets have fallen, and Spanish and Italian government bond yields extended yesterday’s acute gains as doubt concerning the Summit mounted.