Futures Market News
Gold futures fall as euro slips against greenback
Apr 23, 2012 01:01 PM
Gold futures dropped Monday during the first trading session in three days, tracking losses to the 17-nation common currency of the European Union as the world's reserve currency strengthened, according to Bloomberg.
The greenback also capitalized on losses endured by incumbent French President Nicolas Sarkozy, who suffered defeat in the first round of his re-election bid to socialist Francois Hollande, Bloomberg reports. France is host of the euro zone's second-largest economy and thus speaks with authority regarding issues economic and financial with Germany, host of the euro zone's largest economy.
Spring meetings for the International Monetary Fund closed on Sunday in Washington, but the international regulator was able to raise more than $430 billion in pledge money to help preserve the global economy.
"There's the effect of the weaker euro and stronger dollar and that's why we see gold under pressure," currency and metal trading head Bernard Sin with bullion refiner MKS Finance in Geneva told Bloomberg "Physical demand is really very quiet."
At 8:55 a.m. on Monday, gold futures fell 0.91 percent, a $14.90 drop to $1,627.90 per troy ounce.
One trader told the news service that interest in the yellowish metal is on the wane while the market will focus on the IMF meeting as the U.S. Federal Reserve prepares to release a statement regarding monetary policy in the middle of this week.
"There just hasn't been much interest in gold these days, and direction comes from all over including the dollar and stock markets," trader Huang Mingchen with Wonder Futures of China told Bloomberg. "We'll probably get another week of muted trading as markets digest the IMF meeting over the weekend, and before the Fed policy statement."
Yet, 48 hours prior to that statement's release, the U.S. dollar was growing stronger, which tempered the capacities of gold to gain.
"Most investors are on the sidelines and likely to remain there ahead of the [Fed] meeting," director Ronald Leung of Lee Cheong Gold Dealers in Hong Kong told Dow Jones Newswires.
Investors, analysts and other market observers do not anticipate additional asset purchasing by U.S. Federal Reserve Chairman Ben Bernanke and the institution he spearheads.
But high in mind is how long officials with the central bank plan to preserve the policy of low interest rates. The record high price for gold, established early this past September, was set in large part due to the U.S. dollar being watered down following U.S. Federal Reserve quantitative easing programs. The record high price for gold is $1,923.70 per troy ounce.
Should no intervention ensue by the U.S. central bank, Leung predicted an active market.
"We could see some selling if Bernanke does not announce any QE," Leung told the news source.
Tobias Merath, analyst with Credit Suisse, told Reuters that two contrary movements are afoot.
He said the great unknown about the euro zone and its nations' struggle with the sovereign debt crisis projects to be a sizable factor regarding the trade and commerce of the yellowish metal.
"On the one hand, we have U.S. bond yields coming off, which adds some support, but concerns over Europe are capping the upside, because the situation in Europe has the potential to lead to deteriorating liquidity conditions," Merath told the news source. "As we saw at the end of last year, gold is a hedge against all kinds of crises, but not against a liquidity problem, when people are liquidating assets to raise much-needed cash. They also sell gold in this environment."
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