Tag Archives: euro

Nov 30

Price of Gold Weekly Recap – November 26-30, 2012

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Monday Open: $1,750.10
Weekly High: $1,751.80
Weekly Low: $1,709.90
Friday Close: $1,714.70

Gold took a striking dip mid-week but regained losses to end the month with slight gains for November. Still hovering in the $1,700 to $1,750 range, Wednesday was the most peculiar day of the week with a quick plethora of nearly unaccounted for sell-offs, but this still did not force the price down below $1,700.

Monday opened solid and stayed solid. Low volatility in all commodities markets did not affect the price of gold.

Tuesday took a slight dip from further announcements in the U.S. regarding the fiscal cliff approaching at the end of the year. If Democrats and Republicans don’t reach a fiscal agreement by December 30, an automatic $600 billion tax hike and spending freeze motion will go into affect, which could spur the economy into a recession. House of Representatives speaker John Boehner said no substantive progress has been made. However, the little amount of trading on gold due to this news indicates most gold traders believe the crisis will be resolved.

In Tuesday’s European news, a decision was made regarding Greece’s bailout money. Greece will receive a loan with the stipulation that the country will cut its debt/GDP ratio to 124% by 2020. This agreement is likely to raise the value of the euro.

The marketplace didn’t respond to either of these events on Tuesday, but Wednesday morning, one minute after trading opened, a massive sell-off occurred in gold, dropping the price nearly $30 in less than five minutes. Both the U.S. fiscal cliff and Greece’s bailout are bearish for gold, which could reasonably cause a decline in price, but the real impetus for such an immediate loss is the high volume of “sell stop” orders. These orders are automatically programmed to sell off shares once a certain price is reached – in this case, $1,730 for many traders. The bearish pull-out of the market accelerated these automatic sell-stops to result in a drastic price drop for gold, which landed at the lowest price of week, $1,710.

Dave Meger of Vision Financial Markets, pinpointed a new sell-stop number: “The new number to focus on is $1,692—that’s the 100-day moving average,” he said.

Still, the strong selling pressure on Wednesday, which caused quite a buzz, didn’t last. Gold rebounded on Thursday from bargain hunting and short covering. The Wall Street Journal reported on Wednesday that the December FOMC meeting is likely to produce more economic stimulus, which is positive for gold. The dollar was also lower on Thursday.

Friday ended lower again, the price of gold influenced by events earlier in the week that may have made traders skittish. Still, November ended with modest gains.

Jul 27

Price of Gold Weekly Recap – July 23-27

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Monday Open: $1,578.90
Weekly High: $1,626.70
Weekly Low: $,1569.10
Friday Close: $1,624.20

After weeks of a hesitant gold market driven by uncertainties surrounding the European debt crisis and continued lack of U.S. monetary easing, gold finally broke confidently above the $1,600 barrier this week when a series of reports started signaling a weaker euro ahead. Gold gained around $60 from the slow beginning of the week to a somewhat anticipatory closing, moving from the greatest inverse correlation to the dollar since January to the highest price of gold in more than a month.

Gold investors started out the week skeptical as the dollar reached a two-year high and gold stood at a -0.718 correlation with the paper currency, the strongest since the beginning of the year. Since gold trades inversely to the dollar, the yellow metal weakened as the greenback gained strength.

Worries over the Eurozone debt crisis continued to plague gold at the beginning of the week, but took a few surprising turns as the days rolled on. Tuesday started a very slight uptrend when Greece announced the country probably would not be able to pay its debts, indicating to investors there could be room for economic restructuring.

Then, Spain and France announced on Wednesday that the Eurozone would be adopting a common strategy to stabilize the euro, including enacting a supervisory mechanism on all euro area banks. This could mean that the European Central Bank could get significant and cheap funding, which could subsequently devalue the euro, thus elevating gold in a similar inverse fashion as the gold-dollar relationship. Sure enough, Wednesday saw gold reaching a two and a half week high after this news broke.

But it doesn’t end there.

Thursday continued the path of European restructuring and gold was bumped even higher after ECB president Mario Draghi proclaimed that he was ready and willing to take any steps necessary to float the euro. Specifically, “The ECB is ready to do whatever it takes to preserve the euro,” he said. Speculators can decode that as meaning that the bank will be inclined to print more paper money, which would inevitably reduce the strength of the currency and encourage investors to flock back to gold as an established safe haven.

Peter Schiff of EuroPacific Capital is one industry spokesperson who sees this as a major breakthrough for gold. The metal has been stuck in a limbo for a while, and Asian and Indian investors are still generally sitting on the sidelines as their economies stumble through some bumps this year. But while investors have been waiting anxiously for a signal from Federal Reserve chairman Ben Bernake that the U.S. would start printing more money, instead they got that confirmation from the European Central Bank regarding the euro, and it’s no small potatoes.

Schiff said on Thursday, “I’m surprised that gold is not rallying even more considering what’s happening.  Gold has now broken out of a channel.  There was a very nice trendline and we just broke out of that today.  Now that we have broken out of that channel, there is a lot of room to the upside.”

It should be an interesting time ahead for gold.