Gold prices settled slightly lower on Tuesday. The metal’s prices climbed up initially as edgy investors preferred investing in the bullion-normally considered as a safe haven asset- on a day which saw global equities sliding amid worsening euro zone debt crisis. Nonetheless, the metal pared its gains as the euro weakened against the U.S. dollar following Moody’s Investors Services decision to downgrades Germany, the Netherlands and Luxembourg from stable to negative.
Adding to woes was the data which showed that Europe’s private sector is likely to face prolonged recession as surveys showed the slowdown that started in the euro zone's small economies was now clearly visible in Germany and France.
According to dealers, gold prices are very much taking cue from euro-dollar exchange rate volatility as some other factors that influence metal’s price such as further monetary easing and metal’s physical demand have failed to fuel the demand.
Commenting over this matter, Jonathan Jossen, an independent COMEX gold options floor trader, said to Reuters, “Gold is mostly taking its cues from the euro-dollar. Volume is pretty decent, suggesting there are good underlying bids here.”
Spot gold inched up 0.1 percent, to settle at $1,577.86 an ounce, having moved in a very narrow range of less than $20.
U.S. gold futures edged lower $1.20 at $1,576.20. A preliminary data by Reuters showed with trading volume was about 15 percent above its 30-day average.
A 1% decline in S&P 500 Index and sharp retreat in grains prices (having rallied in previous week) also put a lid on gold gains.
Gold investors will now hope that the Federal Reserve will provide some hints on another round of quantitative easing, aimed at stimulating stalling U.S. economy badly affected by the crisis in the euro zone. On Tuesday, a data from Richmond Federal Reserve Bank showed that manufacturing activities in the Mid-Atlantic region was weaker-than expected for the month of July. Not only that; the reading was weakest since April 2009.
COMEX Option Expiry In Spotlight
According to Reuters and COMEX floor trader Jossen, bullish options strategies such as “butterfly spreads” were being traded at higher strike prices such as $1,900 and $2,200 an ounce.
In a note to investors, TD bank said, “open interest for COMEX August options was concentrated around the round-number strike prices including $1,600, $1,550 and $1,650, and that would likely keep gold moves muted.”
Michael Daly, precious metals analyst at futures brokerage Ironbeam, said that traders are more tentative at the moment and very quick to book profits when the opportunity arises.
Speaking to Reuters, Daly also said that volatility in precious metals is likely to increase amid euro zone debt worries and heightened tensions in the Middle East.
The SPDR Gold Trust (ETF) (NYSE: GLD) ended the day 0.32% higher at $153.52, the Market Vectors ETF Trust (NYSE: GDX) ended the day 0.05% higher at $40.72, and the iShares Gold Trust (ETF) (NYSE: IAU) ended the day 0.26% higher at $15.41.
In some other precious metal markets, silver settled lower 0.4 percent at $26.89 an ounce, while spot platinum fell 0.7 percent, to close at $1,382.24 an ounce and spot palladium tumbled 1 percent to $560.75 an ounce.
Earlier, palladium plunged to its 2012 low at $551.68 as flagging demand from automobile industry, mainly from Europe; put the pressure on the metal.
