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Gold Holds Gains on Eurozone Caution

Release Date: 
Wednesday, June 13, 2012

Gold prices moved higher on Wednesday as Spanish bond yields rose and investors remained focused on the Eurozone ahead of key Greek elections and.  Gold was $11.40 higher at 7:36 a.m. Pacific Time on the New York Spot market, trading at $1,622.20 per ounce. Spot silver was $0.08 higher at the same time, trading at $29.15 per ounce. (Click here for the most current spot prices.

Spain's 10-year bond yields rose to their highest level since the euro was introduced. "So far the financial aid promised to Spanish banks has failed to have its desired effect. On the contrary, the sell-off of Spanish and indeed Italian government bonds continues," Commerzbank said in a research note. "The sovereign debt crisis can be expected to keep the markets on tenterhooks for quite some time yet and cause demand for gold to pick up again - not only among retail investors."

"In the short term, gold prices may remain very volatile following the ebb and flow in the news on Spain and euro zone crisis," said Hou Xinqiang, an analyst at Jinrui Futures in China. "But expectations on monetary policy have shifted a little after the bad numbers on the U.S. job market and China's recent rate cut raised hopes on further easing, which will help gold climb after the near-term fluctuation."

Gold may rise in the third quarter as it regains its status as a safe haven, ANZ analysts said in a note. "...Our forecasts suggest renewed appreciation for gold in line with a modification of the relationship between risk appetite and gold prices," ANZ said. The firm expects gold to average $1,659/oz ounce in June.

Kazakhstan, which last week announced that it planned to boost its gold reserves to 15 percent of its total gold and foreign exchange holdings, has raised that figure to 20 percent.  In recent years, Russia, Mexico, Colombia, South Korea and other Asian and emerging market nations have increased their official gold holdings.

(Source: "PRECIOUS METALS: Gold Little Changed in Asia Amid Cautious Trading," Wall Street Journal, June 13, 2012; "PRECIOUS-Gold holds near $1,610 as dollar recovers," Reuters, June 13, 2012; "PRECIOUS-Gold stays above $1,600/oz, Spain woes support," Reuters, June 13, 2012)

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†This material has been prepared for private use. Although the information in this commentary has been obtained from sources believed to be reliable, Goldline does not guarantee its accuracy and such information may be incomplete or condensed. The opinions expressed are subject to change without notice.

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