Futures Market News
Gold futures track euro's losses as election results drag down both
May 07, 2012 02:34 PM
Gold futures slipped in value on Monday, tracking the downward trend of the shared currency of the European Union in the fallout of weekend elections in France, Greece and elsewhere in Europe, according to published reports.
Reuters reports Greek voters' animosity toward austerity measures was demonstrated over the weekend when they stood opposed to the country's efforts to prevent additional damages inflicted by the sovereign debt crisis. Voters sided with anti-austerity political parties and abandoned parties that have implemented the measures that attempt to shield the nation from the debt scourge.
In France, Francois Hollande, a Socialist candidate, unseated incumbent Nicolas Sarkozy on Sunday and analysts are keeping an eye on how he will work with Germany, as the two nations host the euro zone's largest economies and typically speak from a bully pulpit on economic issues in the region.
"Gold opens the week lower with investors in risk-off mode after this weekend's election. Stocks are weaker, the euro is losing ground and, since gold is currently considered a riskier asset, it is also losing ground," trader Alexander Zumpfe with precious metals house Heraeus told Reuters, noting some acquisitions of the yellowish metal were tempering its losses. "We saw some physical buyers coming back this morning."
At 1 p.m. on Monday, gold futures fell 0.32 percent, a $5.20 drop to $1,640 per troy ounce.
In addition to the euro feeling the pinch, high-risk assets - like stocks and commodities - also were under pressure of the political situation in the euro zone.
Stocks in Europe fell to their lowest value in about 18 weeks while futures for German Bunds scaled to their all-time highs.
Though the wobbly financial and economic situation in the euro zone was partially responsible last year for pushing the yellowish metal toward record highs, the U.S. dollar, Bunds and Treasuries issued by the U.S. presently are drawing investors' attention as preferred havens. The record price of gold futures of $1,923.70 per troy ounce was established on September 7, 2011.
MarketWatch also noted the rising value of the U.S. dollar as pressing down both the common currency of the European Union and the price of gold futures.
From late Friday to Monday morning, the U.S. dollar index gained from 79.617 to 79.468. The metric gauges the strength of the world's reserve currency when compared with competing monetary units.
The dollar's gains applied pressure to commodities since it makes them more costly for investors who are dealing with monetary units other than the greenback.
"A firmer U.S. dollar, which rose significantly against the euro in the wake of the elections in France and Greece at the weekend, is weighing on [the gold] price this morning," states a Monday note authored by analysts with Commerzbank, according to MarketWatch.
Dow Jones Newswires reports Monday's losses to bullion ran contrary to the performance from this past Friday, when bullion climbed after employment data released by the U.S. Department of Labor demonstrated results that were weaker than anticipated.
The news source noted currency markets were less active on Monday, which did not provide a motive for investors to upgrade or pull back investment.
One analyst noted that Hollande's victory in France was not a strong enough development to spur markets.
"We definitely need something more dramatic," analyst Frank Lesh with FuturePath trading told the news source. "Gold has lost some of its safety allure at the moment."
German Chancellor Angela Merkel, whose party was dealt a blow in the northernmost state of the nation she leads, said she and Hollande would convene and continue to demonstrate strong relations between the countries.
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