FY: Gold Prices Edge Lower as Euro Falls amid Wait and Watch Policy
Gold Prices fell on Monday as cautious investors adopted a wait and watch policy on the euro zone crisis following initial euphoria which was created by the EU deal, helping the metal rise sharply on Friday. Silver prices also fell on Monday.
Following the conclusion of the EU summit, equities, crude oil and practically all commodities rallied on Friday. The deal paved the way for struggling euro zone’s bank to directly recapitalize from EU rescue funds instead of depending on government debts; besides in order to keep member countries’ borrowing cost low, the EU also decided to intervene in the bond markets.
Nevertheless, on Monday the enthusiasm ebbed to some extent as market participants try to figure out the effectiveness of the measures. Euro, oil prices also retreated with the bullion.
Commenting over a sudden slid in investor’s confidence and gold’s prices, Jeremy Friesen, commodity strategist at Societe Generale in Hong Kong said to Reuters, “These were small steps and the time frame to get some of these things done is long, so I wouldn't be surprised if the market takes a pause.”
While Spot gold edged down 0.3 percent to $1,592.51 an ounce at last check, U.S. gold futures contract for August delivery fell 0.7 percent to $1,593.20.
Meanwhile the latest PMI Index from China and Japan showed that economic activities slowed down in both countries, underpinning that global economy is losing its stem. The manufacturing data from euro zone also showed that its economy continued to contract in June.
According to Friesen, uncertainty over euro zone will continue to weigh on markets; however, policy makers and central bankers are likely to take more accommodative steps like quantitative easing in the second half of the year in order to shore up global economy, said Friesen . “Rate cuts could spark a rally in gold, but if there is still uncertainty, credit conditions could remain tight which would hold gold down,” he added while speaking to Reuters.
Silver also edged down by 1.06%, at $2732 an ounce. In pre-market trading, the iShares Silver Trust (ETF) (NYSE: SLV) is down 0.26%, the ProShares Ultra Silver (ETF) (NYSE: AGQ) is down 0.29%, and the ProShares UltraShort Silver (ETF) (NYSE: ZSL) is up 1%.
