Gold and Silver Look to Exciting Week

Gold prices moved slightly lower in early trade on Monday, a corrective pullback from the strong gains in the gold market made on Friday. The pullback is giving gold bulls a fresh technical momentum, however, as profit-taking winds down and investors look to the Greek bailout talks and the U.S. fiscal cliff. The spot price of gold gained $3.80 per troy ounce to $1,734.00. U.S. gold futures for February delivery traded down $1.00 to $1,752.80 per troy ounce. Silver futures for December delivery gained $0.029 to $34.235 per troy ounce.

Following the Thanksgiving holiday, as traders and investors return, the focus is on Greece, which is the subject of a meeting of Eurozone leaders in Brussels today, and on the U.S. fiscal cliff, a series of tax hikes and budget cuts set to take effect in January 2013.

Ronald Leung at Lee Cheong Gold Dealers in Hong Kong said speculators are still bullish on gold as uncertainties about the fiscal cliff hang around and they believe that central banks around the world will stay loosen monetary policy.

A technical analysis from Swiss investment and bullion bank UBS states the gold price was just a few dollars shy of its 50-day moving average sitting at $1,741, but sees the break above the $1,739.10 per troy ounce level as a crucial bullish development.

Peter Fertig, a consultant with Quantitative Commodity Research, said it’s a risk-off day as stock markets are trading lower, we have a firmer dollar, and investors are seeking safe havens such as government bond markets.

The main focus for markets sensitive to the news is the meeting between European finance ministers and the International Monetary Fund in Brussels, which is the latest in the negotiations over how to deal with Greece’s debt. The purpose of the meeting is to determine when and how to disburse a tranche of bailout money to Greece, but it focused on whether previous monies given to the Mediterranean nation will be written off.

Investors are looking for a first response in currency markets, which could well affect the price of gold. The gold market has suffered lower investor demand overseas as a result of the strong dollar, which has been at two-month highs in currency markets. A stronger dollar makes gold more expensive for holders of foreign currency. No deal on Greece could bring down the euro, further strengthening the dollar.

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