Gold falls on EU debt proposal, high volatility
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Gold and silver bars are pictured at the Austrian Gold and Silver Separating Plant 'Oegussa' in Vienna August 26, 2011.
Credit: Reuters/Lisi Niesner
NEW YORK/LONDON |
NEW YORK/LONDON (Reuters) - Gold fell on Wednesday as top European policymakers offered plans to contain the region's debt crisis, and volatile prices hurt the precious metal's safe-haven appeal.
Bullion dropped as U.S. stocks zig-zagged in choppy trade after news of European Commission proposals for joint euro zone bonds, and potential aid for the euro area from the BRICS emerging economies -- Brazil, Russia, India, China, South Africa -- are considering offering help to the euro area.
Gold options' implied volatility -- a measure of how much traders expect prices to move, either up or down, in the future -- fell after rising to its highest in over two years on Monday. Gold was 5 percent lower after it hit a record high above $1,920 an ounce last Tuesday.
"Some investors may be pulling back from gold due to its high volatility, which may act to undermine its safe haven status," said James Steel, chief commodity strategist at HSBC.
Spot gold was last down 0.8 percent at $1,819.30 an ounce by 11:42 a.m. EDT. U.S. gold futures for December delivery were down $6.50 at $1,823.60 an ounce.
"A sharp decline in lease rates over the past two days is theoretically bearish gold as holders seek to use bullion holdings to raise cash," Steel said.
The one-month gold lease rate was around 0.48 percent, according to data by the London Bullion Markets Association.
Gold fell 2.5 percent on Monday as investors sold gold to cover margin calls in the battered equity markets driven by euro debt fears.
Concern about the deepening European debt crisis grew after Moody's Investor Services cut its ratings on the debt of France's two largest investment banks because of their exposure to Greece, while Italy paid more in interest at a sale of its five-year bonds than at any time since joining the euro.
U.S. WORRIES
U.S. Treasury Secretary Timothy Geithner decided to attend a meeting of EU finance ministers on Friday -- the first time a U.S. Treasury Secretary will attend the meeting..
Gold losses slowed after U.S. data showed wholesale inflation slowed in August and retail sales stalled, after consumer confidence plunged.
Flows of metal into exchange-traded funds backed by physical gold -- one of a number of gauges of investor demand -- have risen by 4 percent so far this quarter, compared with a 1 percent rise in the third quarter of 2010.
The gold market awaits the Federal Reserve's policy meeting next week for a signal on future U.S. monetary policy.
The Fed's quantitative easing program helped boost gold, which is up 40 percent since the start of the central bank's $600-billion bond-buying spree that ended in June.
In other precious metals, silver was down 1 percent at $40.65 an ounce, platinum was up a touch at $1,810.74 an ounce, while palladium was down 0.5 percent at $718.22 an ounce.
(Reporting by Frank Tang; Editing by David Gregorio)
(This story corrects day of week in first paragraph, please read "Wednesday" instead of "Tuesday")
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Gold just sits and doesn’t create any jobs. Speculators look to gold as a safe investment in something that mostly sits, like diamonds.
If the Federal Reserve were to sell some gold the price would go down and the products that use gold would cost less and the speculators would be forced to find something else to speculate on.
Gold just sits and doesn’t create any jobs. Speculators look to gold as a safe investment in something that mostly sits, like diamonds.
If the Federal Reserve were to sell some gold the price would go down and the products that use gold would cost less and the speculators would be forced to find something else to speculate on.
In the meantime two major French banks were downgraded by Moodys, consumer confidence is falling like a hammer and retail spending, the primary driver for US GDP is falling even more than the already expected dismal amount.
Mostly what we continue to get is half baked headlines to explain problems so complex that even mathematicians and scholars of history can not articulate it it in a sound byte. Basically, as Chris Powell has said at the gold antitrust coalition (GATA): There are no markets anymore, just manipulations. What we see in gold and stocks is primarily the result of large scale “intervention.” Gold is headed to $5000 and then $10,000 and yes, there is a lot of volatility at these levels but with the US economy stalling, global economy stalling and now we are showing signs of slowing inflation, Ben Bernanke and the Fed will have more wiggle room to perform operation Twist or whatever machinations they come up with and while they may not announce it next week, it also gives them cover to begin the outright implementation of QE3, which I feel certain they need to do with the situation in both EU and US economies deteriorating, especially among the financial amalgamations, once called Banks.
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