Gold Up, Erases Loss on ECB Expectations Posted by Adam King on August 17, 2012
August 17, 2012 – The price of gold gained some firmness on Friday, following rises in both the euro and European stock markets amid comments given by German Chancellor Angela Merkel late Thursday that brought markets a renewed hope for the resolution of the European debt crisis.
The rise, which erases any weekly loss in the gold price, does not constitute a breakout from the range-bound price in which gold has been trading since the beginning of July. Platinum prices have gained 4.3 percent during the week to bring the precious metal toward their biggest weekly gain since mid-June following the closing of Lonmin’s South African operations amid violence.
The spot price of gold gained 0.1 percent to $1,616.45 per troy ounce as US gold futures for December delivery were down $.50 per troy ounce to $1,618.70. The gold price has struggled to gain a foothold all week as markets and investors look for direction from policymakers.
Matthew Turner, an analyst with Mitsubishi, believes gold will hold in its current range in the short term. Among the reasons for his analysis, he cited the German constitutional court, which will issue a ruling on the Eurozone rescue fund, Spanish bond auctions, and the IMF interventions in Greece, though these are all market events currently timed for September. Turner sees September as a big month in the gold market.
Weakness in the dollar made it more difficult for gold to gain all week, despite the relatively optimistic sentiment on Europe. The euro gained 0.2 percent against the dollar following a comment issued by Angela Merkel, which indicated that European Central Bank president Mario Draghi’s pledge to do what is necessary to preserve the euro is “completely in line” with the approach taken by European leaders.
Most analysts are hoping that the ECB will take extreme measures, including bond buying, in order to progress in the resolution of the debt problems in the Eurozone. This sentiment is combining with expectations on the other side of the Atlantic that the Federal Reserve will also increase liquidity in order to give the gold market a lift.
European shares reached a five-month high on Friday as a key index set to extend its best weekly winning streak in seven years.
German Bunds dipped as the rally in European stocks took some of the demand away from the safe-haven debt market.
Among other precious metals, spot silver gained 0.2 percent to $28.24 per troy ounce.