Futures Market News
Greenback's strength, European Union woes drag down gold futures
Jun 28, 2012 03:48 PM
Economic data released by the U.S. and continued skepticism about the two-day summit in Brussels helped pull down gold futures on Thursday, published reports indicate.
The yellowish metal was heading toward its sharpest loss in one week of trading as the U.S. dollar strengthened, Bloomberg reports. With slightly more than one trading day left in the second quarter of 2012, the value of the world's reserve currency was heading toward gains of about 4.6 percent during that time period against six rival monetary units.
During the second three months of this year, the price of gold futures were driving toward losses of 5.6 percent, representing the largest quarterly loss since 2004.
"Gold is under pressure because the U.S. economy is showing no signs of strength," senior commodity broker Phil Streible with R.J. O'Brien & Associates in Chicago told the news source. "People are moving to the dollar since there is very little expectation the European leaders will find a solution."
At 3:04 p.m. on Thursday, gold futures fell 1.6 percent, a $25.30 loss to $1,553.10 per troy ounce.
Jobless claims in the U.S. last week neared the top amount thus far this year, according to the U.S. Labor Department.
One investment officer said now is a key time for commodities such as gold. Preoccupations about deflation are growing ever-stronger, and are not to be ignored.
"The precious-metals complex is at a very critical juncture," chief investment officer Scott Gardner with Verdmont Capital in Panama City told the news source. "Deflation concerns have come back to the forefront, and gold is selling off in sympathy with cyclical commodities."
The first day of the Brussels summit of leaders of European Union nations already was being panned, pursuant with the general temperature of prospects in the days leading up to the meetings.
Fears of the sovereign debt crisis prompting a worldwide economic slowdown continued growing larger but the yellowish metal has not caught on as a safe-haven asset storage. Rather, the precious metal has been viewed as a risky asset.
"The picture is not pretty for gold at the moment, it hasn't been," broker and futures analyst Frank Lesh with FuturePath Trading in Chicago told MarketWatch on Thursday. "Today is risk off."
He told the news source that picture is made unattractive by unanswerable questions about the Brussels summit, the strength of the world's reserve currency and significant losses to U.S. stocks.
One gold analyst said the market for the yellowish metal is immersed within the unknown.
"Gold trading volume has been low recently. This might be due to the summer doldrums or because without concrete improvement in the situation in the euro zone ... gold lacks clear near-term direction," bullion analyst James Steel with HSBC told MarketWatch.
The Wall Street Journal reports bullion was being pinched by the belief in the dangers that the sovereign debt crisis still poses to financial systems and economic growth the world over.
The fear of U.S. and European leaders' unwillingness to immediately tackle the debt scourge also presents challenges.
Worldwide central banks are reticent about intervening to support their nations' financial systems, which does the price of gold no favors.
"It's been the central bank liquidity measures that have been one of the major legs of support for the gold market," metals trading director Dave Meger with Vision Financial Markets told The Wall Street Journal. "As you undermine one of those legs, it gets a bit wobbly."
Reuters reports the price of gold fell on Thursday also because the U.S. Supreme Court preserved a vital component of the nation's healthcare law.
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