Increased concerns about the economy of the euro zone were pinching stocks and policy makers were set to convene a policy meeting this week, which also is likely to impact the price of the yellowish metal.
Scandals recently erupted in the euro zone, which is believed to be recovering from the damaging tendencies of the sovereign debt crisis. For three years the euro debt scourge attacked European banks, markets and public finance systems, and some officials are concerned that the rough economic times might manifest again as a consequence of turmoil in Italy and Spain.
“Gold and silver have always been the ultimate flight-to-quality asset class,” senior broker Kurt Pfafflin with Daniels Trading said. “They are safe-haven assets that people turn to in times of extreme chaos to protect their wealth or purchasing power. If geopolitical conditions change for the worse and tensions increase, I think we’ll start to see more of a geopolitical risk premium added and accounted for in price.”
At 2:32 p.m. on Wednesday, gold futures climbed 0.27 percent, a $4.35 lift to $1,677.39 per troy ounce. At 2:22 p.m., silver futures slipped 0.24 percent, an 8-cent loss to $31.80 per troy ounce.
All-time high challenge?
The record prices for the yellowish and whitish metals are $1,923.70 per troy ounce and $50.35 per troy ounce, respectively. Bullion notched that record high in September 2011 while silver futures last climbed higher than the psychological threshold of $50 per troy ounce in 1980 when it established its record highs.
But the senior broker with Daniel’s Trading is convinced that this will be the year that both precious metals soar past those record highs.
He said people who have patiently awaited those two monumental occasions finally will be rewarded, citing negative market sentiment as being the primary driver.
The yellowish metal’s record high was established as worldwide central banks spurred their national economies by implementing monetary easing programs.
Silver notched record highs when the Hunt brothers of Texas attempted to corner the market. Yet in May 2011 the whitish metal was within $1 of pushing past those two thresholds – the $50 mark and the record price – before crashing.
Flat performance thus far
The yellowish metal thus far this year for the most part has been flat, Reuters reports.
One primary driver of that performance is likely the stronger economic news released by worldwide economies, such as the U.S. and China. The Asian nation struggled for several months last year yet manufacturing, among additional sectors, appears to be gaining momentum.
“Certainly the stronger performance of more conventional assets, certainly equity markets, has taken the shine off gold,” analyst Daniel Brebner with Deutsche Bank told the news source. “Safe-haven assets have performed fairly poorly as expectations of growth have improved … and a lot of those debt-related risks have for the time being faded into the background. In that kind of environment, there is no significant motivation for gold prices to rise on the basis of investment demand.”
ECB policy makers to convene
The central bank of the European Union is set to convene on Thursday and of concern is the strength of the euro.
MarketWatch reports President Mario Draghi will deliver commentary after the meeting, which one firm’s administrator said will draw sizable attention and might even benefit the yellowish metal.
Bullion is rising “ahead of ECB monthly meeting on Thursday and [the] press conference with Draghi, which could show further color on ECB policy going forward,” managing director Jeffrey Wright with Global Hunter Securities told the news source.
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