Get 40% Off
💰 Buffett reveals a $6.7B stake in Chubb. Copy the full portfolio for FREE with InvestingPro’s Stock Ideas toolCopy Portfolio

PRECIOUS-Gold jumps 1.5 pct on euro zone debt fears

Published 05/20/2011, 04:11 PM
PMC
-
GC
-
SI
-
CL
-
PA
-
PL
-
SLV
-

* Gold jumps as euro tumbles after Fitch cuts Greek rating

* Gold down 3 of last 4 days on weak data, end of QE2 fear

* Silver ETF holdings drop over 2 pct

* Coming up: Chicago Fed index due Monday (Adds CFTC weekly trade report in paragraphs 10-11)

By Frank Tang

NEW YORK, May 20 (Reuters) - Gold rose 1.5 percent on Friday, its biggest daily gain in two weeks, on safe-haven buying as investors fretted about euro zone debt after Fitch cut Greece's credit ratings.

Bullion fell early in the session before turning higher after Fitch downgraded Greece's rating and as the International Monetary Fund urged Europe to agree to more comprehensive measures to tackle the debt crisis. [ID:nLDE74J1KA]

The euro fell against the dollar on caution before upcoming Spanish elections this weekend and the uncertain Greek debt situation. Crude oil and commodities reversed early losses as the dollar pared gains, and the euro zone worries boosted gold and silver.

"A lot of the move this morning is prompted by the move of the dollar. That dollar strength is probably short-lived...It has largely run its course and may soon begin to reverse," said Jeffrey Kleintop, chief market strategist of LPL Financial, which has $100 billion in assets under management.

Spot gold

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads .

Gold is up 1.5 percent for the week. The metal is still 4 percent lower after rallying to a lifetime high near $1,575 an ounce in early May.

Silver

Bullion has dropped three out of the last four sessions on weak U.S. housing and manufacturing data and uncertainty about the end of the the Federal Reserve's bond-buying program.

"This week, we've had one of the worst weeks for economic data so far this year, as most of the data came in below expectations. I don't think that will be the case next week," said Kleintop, whose firm has an overall commodity allocation of between 10 to 20 percent.

Managed money sharply scaled back their bullish bets in COMEX gold futures and options to the lowest level since March as prices fell sharply, U.S. regulator data showed. [ID:N20573163]

Investor sentiment took a toll on Monday when billionaire financier George Soros dumped almost his entire $800 million stake in bullion in the first quarter, well before a commodities slump blamed partly on reports he was liquidating his holdings, regulatory filings showed. [ID:nN16628736]

VOLATILITY RISING, OPTION EXPIRY

CBOE gold volatility index <.GVX>, a gauge of bullion investor anxiety, rose 3 percent, its first rise this week, after the metal moved in a $30 range on Friday.

COMEX options expiry next week were also keeping prices hemmed in around the $1,500 mark, where sizable open interest was aligned, said Tom Kendall of Credit Suisse.

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads .

Prices tend to gravitate toward large pools of open interest as options expire. June options are scheduled to expire May 25. <0#GCc1++>

Also supporting gold was news that the cost to hedge against a U.S. government debt default rose on Friday to its highest level since January ahead of the government's sales of $99 billion in securities next week. [ID:nN20198528]

Worries persist over Washington's struggle to reach a deficit-cutting deal and to raise its $14.3 trillion legal borrowing limit, which was hit on Monday.

Gold is among one of the assets expected to fall in the three months after the end of the Fed's second massive bond buying operation, also known as quantitative easing, or QE2, a Reuters poll found. QE2 is scheduled to expire in June.

Bullion was up 20 percent since August when Fed Chairman Ben Bernanke's speech at Jackson Hole, Wyoming marked the beginning of QE2. The Fed is not expected to raise interest rate for the rest of 2011.

CHART POTENTIAL

On the charts, gold kept finding support at its 50-day moving average, a level it has held for more than three months. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

Graphic on 50-day MA: http://r.reuters.com/keq69r

Graphic showing commodity performance in May:

http://r.reuters.com/nab49r

Graphic on sovereign debt default risk matrix:

http://r.reuters.com/jep69r

^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

"Gold's been given every opportunity to break this week, and it has refused to do so, and now it appears in the process of breaking out to the upside instead. We are much impressed ... enough so to add to our gold positions," said Dennis Gartman, publisher of The Gartman Letter.

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads .

Silver was set to end the week about 1 percent for its third consecutive weekly decline.

Holdings of the largest silver-backed exchange-traded-fund (ETF), New York's iShares Silver Trust , dropped 2.32 percent on Thursday from Wednesday. [GOL/ETF]

The drop in iShare silver holdings suggests rallies will continue to prompt bouts of long liquidation from speculative investors, research firm FastMarkets said in a note.

Among platinum group metals, platinum

LAST/ NET PCT YTD

CLOSE CHG CHG CHG US gold 1508.90 16.50 1.1% 6.2% US silver 35.087 0.155 0.4% 13.4% US platinum 1769.40 0.40 0.0% -0.5% US palladium 735.50 7.35 1.0% -8.4% Gold

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.