MW: Gold trades near session low after earlier rise
Rally on Spanish bank bailout fizzles, though losses are limited
By Myra P. Saefong and Chris Oliver, MarketWatch
SAN FRANCISCO (MarketWatch) — Gold prices edged lower Monday to trade near the session’s low as investor confidence over a Spanish bank bailout diminished.
Gold for August delivery GCQ2 -0.25% lost $5, or 0.3%, to $1,586.40 an ounce on the Comex division of the New York Stock Exchange, trading new the intraday low of below $1,584 to mark a reversal from a high above $1,609 during European trading hours.
July silver SIN2 -0.36% also pulled back, falling 15 cents, or 0.5%, to $28.33 an ounce.
Spain on Saturday agreed to receive 100 billion euros ($125 billion) in financial aid for its struggling banking sector from the European Union. Spain’s banking sector to get bailout.
“The bank bailout program has been welcomed by the market and added some confidence — this being the reason why [the euro] initially strengthened,” said Frederic Panizzutti, senior vice president at MKS, a Switzerland-based precious metals service provider.
At last check, however, the euro EURUSD -0.85% traded well off its highs against the U.S. dollar, buying $1.2552 after a high of $1.2647. The dollar index DXY -0.16% continued at levels a bit lower, at 82.224 versus 82.439 late Friday. Read more on currencies.
The euro, initially stronger on the back of the Spanish banking liquidity package “added some support, allowing gold to break over $1,600, but the move was short lived and met with profit taking” as Europe opened, pushing gold lower, said Panizzutti.
Profit-taking pattern
In a note Monday, Mark O’Byrne, executive director at GoldCore, said the bailout is “nothing more than another short-term misguided panacea and a mere sticking [of] plaster on the gaping terminal hole as only the euro-zone debt crisis could.”
Looking ahead, “currencies will continue to prevail in the coming days and we will closely monitor the EUR/USD,” Panizzutti said. “The sentiment for gold remains positive, but its failure to break higher despite a few attempts is resulting in quick profit takings each time it moves a few [U.S. dollars] higher.”
For the short run, $1,640 “remains the key resistance to break,” he said. If broken, upside momentum’s likely to kick in.
Monday’s action followed a gain of $3.40, or 0.2%, on Friday, when prices saw support linked to traders unwillingness to short the metal ahead of the weekend amid potential market-making developments.
Also Monday, the other major metals looked to recover some of their end-of-week losses.
July copper HGN2 +1.46% tacked on 5 cents, or 1.5%, to $3.33 a pound.
July platinum PLN2 +1.30% traded at $1,441 an ounce, up $15.90, or 1.2%, while September palladium added $7, or 1.1%, to $619 an ounce.
Myra Saefong is a MarketWatch reporter based in San Francisco.
Chris Oliver is MarketWatch's Asia bureau chief, based in Hong Kong.
