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Gold Up 1 Percent, Stocks, Commodities Rebound

July 13, 2012 – Gold is up 1 percent on Friday, correcting losses for the week to rise along with stocks and other commodities. A report released from China indicates growth has slowed and is generating demand for higher risk assets. The euro, which has performed poorly against the US dollar since a rate cut by the European Central Bank, has steadied, also benefitting precious metals.

European stocks recovered the losses of the previous day, climbing 0.7 percent on Friday, as oil gained more than $1 per barrel. Gold has moved in line with “risky” assets this year against the dollar, which has been the haven of choice for many investors during the recent weeks.

The spot price of gold was up 0.7 percent at $1,581.84 per troy ounce and US gold futures contracts for August delivery were up $16.60 per ounce at $1,581.90. Prices have remained within a range of $1,525-$1,675 for the last three months, creating a very bound market.

“Gold’s drifting with the tide,” Macquarie analyst Hayden Atkins said. “It’s still in this range, where no-one has a lot of conviction over whether it should do one thing or another. We may get that in the next couple of months, but in the near term it’s not clear what’s going to push it one way or another.”

The precious metal is little changed from its close last week, but remains down about 1 percent for the month of July. Most of the ground gold has lost is a reflection of gains made on the speculation the Federal Reserve would launch a new round of quantitative easing.

Further easing would keep pressure on long-term interest rates, which would benefit the opportunity cost of holding gold. Easing also weighs on the dollar, which benefits precious metals. However, minutes from the Fed meeting this week displayed little internal support for stimulus.

Downward pressure on gold brought the metal to a low of $1,565.64 per troy ounce in early trading on Friday. Pressure eased, however, as the euro stabilized in its relation to the US dollar after a ratings downgrade of Italy brought the currency to a two-year low.

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