Gold for June delivery closed down $3.90, off session lows, to settle at $1,522.80 an ounce at the Comex division of the New York Mercantile Exchange. The metal has stayed between $1,531.10 and $1,514.60 while the spot gold price was down $4, according to Kitco's gold index.
Silver prices were 31 cents lower to close at $37.33 an ounce after a strong overnight rally to $37.13 an ounce. The U.S. dollar index was shedding 0.67% to $75.41.Gold and silver prices were looking to shake off the hangover of options expiration despite a weaker dollar and disappointing economic data. People filing for unemployment claims rose 10,000 last week and the U.S. economy grew just 1.8% in the first quarter, expectations were for 2% growth.
The negative news and weaker currency would typically push gold and silver higher. "On option expiration dates, gold usually has a decline, so not that unusual," says Nick Barisheff, CEO of Bullion Management Group, but its "not that big a move overall." June options contracts that were 'in the money' are now August futures contracts.
If a trader has the right to buy a contract for lower than the current price, he will roll over the contract in order to have the potential to make money. Conversely if a trader has the right to sell a contract at a price higher than the current one, he will also roll over the contract. George Gero, senior vice president at RBC Capital Markets, says that traders will "sell off the extra contracts especially headed into a long holiday weekend."
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James Moore, research analyst at FastMarkets, says that gold will continue to "benefit from investment diversification as investors look towards safe-haven asset types with dip buying set to remain a feature." The euro debt crisis is still searching for resolution, the U.S. is butting up against its own debt ceiling and reports circulated that China investment funds would loan money to the EU through buying bonds from the European Financial Stability Fund. When currency issues are in the spotlight, gold and silver can benefit as a safe place to store wealth.
Barisheff says that money has three goals: to be a unit of account, medium of exchange and store of wealth. Basically you need to buy, trade and price goods with it as well as have it reflect wealth. "Currently the currencies around the world work well on one and two but are disastrous as a store of wealth." Barisheff estimates that since the U.S. abandoned the gold standard in 1971, the currency has lost 84% of its purchasing power.
