Partial Recovery in Gold Posted by James Randolph on June 25, 2012
June 25, 2012 – Prices for gold stabilized in Europe on Friday, a day after the largest one-day losses in the gold market since February 29. Lower prices brought bargain buyers back into the market as investors sought to see the first signs of a bottom in gold.
Gold fell sharply on Thursday following the Federal Reserve’s disappointing investors by neglecting to announce a new round of quantitative easing. The Federal Reserve did announce a continuation of the Operation Twist program, but will not be embarking on an outright purchase of securities at this time.
The anticipation of stimulus measures, which would put pressure on long-term interest rates, weighed down the dollar and boosted the price of gold earlier this month. Gold has performed well, historically, with the institution of quantitative easing.
Since that time, gold has erased the majority of the gains for the month of June and is possibly set for the largest weekly loss since March.
Spot gold, up 0.3 percent at $1,569.39 per troy ounce, performed on par with US gold futures for August delivery, which were up $4.60 per troy ounce at $1,570.10.
Nic Brown, a Natixis analyst said while the Fed has chosen not to pursue aggressive stimulus measures, relatively negative economic data out of Europe, China, and the United States on Thursday continued to suggest that intervention from the Federal Reserve is a strong possibility.
A Reuters poll on Thursday revealed Wall Street’s top bond firms continue to estimate a 50 percent possibility that the Fed will embark on a third round of quantitative easing.
Technically, gold is experiencing good support at $1,560 on the topside and below at $1,530 per troy ounce.
Physical gold demand in key markets remained muted, however. Imports to India, the largest gold market in the world, dropped by $6.2 billion since April compared with last year according to finance secretary R.S. Gujral.
The weakness in the rupee is partially to account for the drop in demand. Also, the federal government’s decision to double import duty to 4 percent for the purchase of gold bullion has had an adverse effect on the physical market.