Tag Archives: gold-euro relationship

Mar 25

Price of Gold Weekly Recap – March 18-22, 2013

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Monday Open: $1,605.80
Weekly High: $1,615.90
Weekly Low: $1,604.60
Friday Close: $1,607.90

Gold stayed in a fairly limited trading range this week, but exhibited holding strength amidst some economic woes in the European Union. It was an overall good week for gold bugs, with a few new price highs and a slight advantage by Friday.

Monday started out fairly slow, trading above the $1,600 level and marking a fresh 3-week high. News in Cyprus has brought the European sovereign debt crisis back to the forefront of the global stage. The Cyprus government has decided to tax savings account plans in their domestic banks as a way to resolve some of their debt with the European Central Bank and International Monetary Fund. In addition to angering Cyprus residents, this move has sparked fears throughout the rest of Europe that other countries will soon follow suit. This crisis is bullish for gold as traders see the precious metal as a safe haven to unstable economies. Monday made modest gains.

Tuesday continued to send gold upwards to a new 3-week high, as the Cyprus situation increased safe-haven demand. Cyprus banks were closed this week as the government reconsiders the tax plan.

Wednesday brought the week’s anticipated Federal Reserve statements. As expected, the Fed is making no changes to their current monetary policy, but due to previous meetings and tentative indications of change, some analysts believe the Fed is subtly inching toward revving up interest rates as the economy improves. The FOMC meeting notes were modestly bearish and Wednesday closed lower.

Thursday saw gold prices hit the week’s third fresh 3-week high. The risk-off trading from Wednesday rebalanced as others saw the chance to jump in the market. As Cyprus’s crisis continues, gold maintains a steady rhythm of safe haven demand. More weak European Union economic data came out Thursday, prompting the hedge fund attitude even more, and the world is now watching North Korea, as the country has made threats to Japan. Crisis in this realm of the world could also send more people to take refuge in gold.

Friday dropped a little on profit taking, but ended the week a little higher than it began. The Cyprus questions continue into next week.

Aug 03

Price of Gold Weekly Recap – July 30-August 3

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Monday Open: $1,621.00
Weekly High: $1,625.40
Weekly Low: $1,586.30
Friday Close: $1,603.60

This week gold opened at a 6-week high, trailing off gains from last week’s European refinancing, and though the price of gold dipped lower as the week progressed, it still managed to close above the $1,600 mark. After last week’s 2.5% price jump due to news that the European Central Bank is prepared to give the economy a boost by printing more money (which will devalue the euro and send people to a safe haven in gold), Monday opened high but sank on Tuesday as many investors decided to opt out of gold and leave the market with the gains just made.

U.S. unemployment and job loss data was bleak early in the week, buffering gold losses, and the Fed gave an uneventful public address on Wednesday, which again confirmed no economic easing, though it did acknowledge economic sluggishness. Still, gold bulls are hopeful that the coming weeks will finally show some economic easing from the Federal Reserve.

By Thursday, gold had been on a 4-day downturn as both the U.S. and the Eurozone disappointed with a lack of concrete economic policy. Contrary to expectations, European Central Bank president Mario Draghi did not announce any monetary policy or interest rate changes. He addressed the public to say that any government bond buying wouldn’t occur until September, and only on certain conditions. Thursday dropped down to around $1,585 — $30 down from Monday.

“It appears that central banks now need more economic data for them to come out with more aggressive actions, and that’s disappointing for gold investors,” Phillip Streible said on the matter. He is the senior commodities broker at R.J. O’Brien, a futures brokerage.

Yet, gold rose a percentage point on Friday as the dollar buckled, more negative unemployment data rolled in, and investors once again began betting on Fed easing. This kept the yellow metal afloat above the $1,600 mark; although, the beginning of the week marked a 6-week high, the end of the week marked the biggest weekly drop in prices in the same time frame. Gold is still trapped in the $1,525 to $1,675 trading range, a long way from the year’s high of $1,781 in March, held captive mainly by the ambiguous remarks made on economic policy by Fed and ECB chairmen.

Jul 27

Price of Gold Weekly Recap – July 23-27

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Monday Open: $1,578.90
Weekly High: $1,626.70
Weekly Low: $,1569.10
Friday Close: $1,624.20

After weeks of a hesitant gold market driven by uncertainties surrounding the European debt crisis and continued lack of U.S. monetary easing, gold finally broke confidently above the $1,600 barrier this week when a series of reports started signaling a weaker euro ahead. Gold gained around $60 from the slow beginning of the week to a somewhat anticipatory closing, moving from the greatest inverse correlation to the dollar since January to the highest price of gold in more than a month.

Gold investors started out the week skeptical as the dollar reached a two-year high and gold stood at a -0.718 correlation with the paper currency, the strongest since the beginning of the year. Since gold trades inversely to the dollar, the yellow metal weakened as the greenback gained strength.

Worries over the Eurozone debt crisis continued to plague gold at the beginning of the week, but took a few surprising turns as the days rolled on. Tuesday started a very slight uptrend when Greece announced the country probably would not be able to pay its debts, indicating to investors there could be room for economic restructuring.

Then, Spain and France announced on Wednesday that the Eurozone would be adopting a common strategy to stabilize the euro, including enacting a supervisory mechanism on all euro area banks. This could mean that the European Central Bank could get significant and cheap funding, which could subsequently devalue the euro, thus elevating gold in a similar inverse fashion as the gold-dollar relationship. Sure enough, Wednesday saw gold reaching a two and a half week high after this news broke.

But it doesn’t end there.

Thursday continued the path of European restructuring and gold was bumped even higher after ECB president Mario Draghi proclaimed that he was ready and willing to take any steps necessary to float the euro. Specifically, “The ECB is ready to do whatever it takes to preserve the euro,” he said. Speculators can decode that as meaning that the bank will be inclined to print more paper money, which would inevitably reduce the strength of the currency and encourage investors to flock back to gold as an established safe haven.

Peter Schiff of EuroPacific Capital is one industry spokesperson who sees this as a major breakthrough for gold. The metal has been stuck in a limbo for a while, and Asian and Indian investors are still generally sitting on the sidelines as their economies stumble through some bumps this year. But while investors have been waiting anxiously for a signal from Federal Reserve chairman Ben Bernake that the U.S. would start printing more money, instead they got that confirmation from the European Central Bank regarding the euro, and it’s no small potatoes.

Schiff said on Thursday, “I’m surprised that gold is not rallying even more considering what’s happening.  Gold has now broken out of a channel.  There was a very nice trendline and we just broke out of that today.  Now that we have broken out of that channel, there is a lot of room to the upside.”

It should be an interesting time ahead for gold.