PRECIOUS-Gold steady below record, debt worries support
SINGAPORE, July 19 (Reuters) - Gold held steady below its record high on Tuesday, as sentiment continued to be supported by worries about a spreading debt crisis in the euro zone and uncertainties in U.S. debt ceiling talks.
FUNDAMENTALS
* Spot gold edged lower 0.1 percent to $1,601.86 an ounce by 0021 GMT, off the record high of $1,607.01 reached on Monday.
* U.S. gold GCcv1 was little changed at $1,602.50.
* Holdings in the SPDR Gold Trust , the world's biggest gold-backed exchange-traded fund, gained 1.1 percent to 1,249.352 tonnes by July 17, highest in six months.
* The White House was pursuing a fallback plan with Congress to raise the U.S. debt ceiling and avert a default that could plunge global financial markets into chaos.
* While the U.S. Congress approaches the deadline on Aug. 2 on deficit talks, European governments and banks struggled to reconcile competing proposals for a second bailout of Greece, before leaders meet later this week to prevent the crisis from spreading in the region.
* Spot silver was nearly flat at $40.48 an ounce, off Monday's high of $40.70 -- its loftiest level since May 4. U.S. silver SIcv1 gained 0.4 percent to $40.50.
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MARKET NEWS
* U.S. stocks dropped on Monday as bank shares bore the brunt of investor frustration over governments' inability to solve debt crises in the United States and Europe.
* The euro steadied and the dollar edged lower against a basket of currencies on Tuesday.
DATA/EVENTS 0900 Germany ZEW economic sentiment Jul 1100 U.S. Bank of America earnings Q2 1145 U.S. ICSC chain stores yy Weekly 1230 U.S. Build permits: change mm Jun 1230 U.S. House starts mm: change Jun 1230 U.S. Housing starts number mm Jun 1300 Canada BoC rate decision Jul :: U.S. CSX corp earnings Q2
PRICES
Precious metals prices 0021 GMT Metal Last Change Pct chg YTD pct chg Volume Spot Gold 1601.86 -1.54 -0.10 12.85 Spot Silver 40.48 -0.03 -0.07 31.17 Spot Platinum 1764.49 -5.49 -0.31 -0.17 Spot Palladium 790.90 -1.67 -0.21 -1.08 TOCOM Gold 4073.00 42.00 +1.04 9.22 28168 TOCOM Platinum 4531.00 34.00 +0.76 -3.51 2614 TOCOM Silver 102.20 5.10 +5.25 26.17 894 TOCOM Palladium 2024.00 44.00 +2.22 -3.48 123 COMEX GOLD AUG1 1602.50 0.10 +0.01 12.74 2401 COMEX SILVER SEP1 40.50 0.16 +0.39 30.90 500 Euro/Dollar 1.4113 Dollar/Yen 79.01 TOCOM prices in yen per gram. Spot prices in $ per ounce. COMEX gold and silver contracts show the most active months (Reporting by Rujun Shen; Editing by Himani Sarkar)
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Just last week Ben Bernanke signaled that the Fed was prepared to provide stimulus if the economy showed signs of weakening or turning towards a double dip. So, a day or two later JP Morgan cuts 3rd quarter estimates for GDP growth from 3% to 2.5% and virtually every economic indicator shows accelerating weakness. This is compounded by the fact that state and federal governments are laying of workers in droves and this is going to impact tax revenues, consumer spending and economic activity. Also, the bond markets are showing signs of wilting now that QE2 and the normal POMO acitivity has stopped.
Its not the debt ceiling debate that is driving gold and silver higher, its the awareness that both the US Dollar and Euro and for that matter, all other currencies held by massively debt encumbered nations are promises backed by nothing. Currency used to be backed by something valuable, gold and silver. In 1971 Nixon defaulted on the US gold obligation and took all backing away from the dollar. The dollar has been in relative free fall ever since and debt levels have been growing in some proportion to the devaluation of the dollar.
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