Virtual Metals Group

Media/Press

Gold hits 1-week high on uncertainties over Greece

Apr 16 2010 (Reuters)

"Gold rose to a one-week high on Friday, gaining 1 percent, as uncertainty about currencies and debt-laden Greece lured investors to the metal as a safe haven.

"Gold was 1.6 percent higher for the week, as the market recovered following last Friday's sell-off after U.S. regulators charged major commodities player Goldman Sachs Group Inc with fraud.

"Gold will keep taking cues from currency markets, driven by Greece and other possible sovereign debt downgrades, analysts said.

""With more questions on Greece's debt, people want to be in a hard currency now," said Adam Klopfenstein, senior market strategist at MF Global's Lind-Waldock unit.

""Even though the dollar has been a refuge of late, at some point people are starting to feel that the euro has come down more than it should be. People want to have their money in a metal such as gold," Klopfenstein said.

"Spot gold was at $1,155.75 an ounce at 3:58 p.m. EDT (1958 GMT), against $1,140.45 late in New York on Thursday.

"U.S. gold futures for June delivery on the COMEX division of the NYMEX settled up $10.80 at $1,153.70 an ounce.

"Gold investors took heart as the euro turned higher against the dollar after Germany said it was ready to make a contribution to Greek aid.

"Gold's underlying strength could be seen as bullion priced in non-U.S. currencies has been hitting new highs.

"Euro-priced gold meanwhile hit an all-time high at 865.04 euros an ounce as Greece's appeal for emergency aid to the IMF and its European peers drew the euro zone's fiscal woes back into the spotlight.

"The Greek debt crisis can be viewed as both positive and negative for gold, as it tends to pressure the euro, which is negative for dollar-priced commodities, but boosts interest in bullion as a haven from financial risk.

""The currency aspect (of the gold market) is more short term," said VM Group analyst Matthew Turner. "If there is a bailout, the euro will rise and gold will rise in dollars, and if the situation gets worse, we will see gold under pressure."

""But in the medium term, this uncertainty is good for gold, even though it is bad for the euro. As there doesn't seem to be a quick solution to the problem, it is something that will keep gold supported over the rest of the year."

"The link between the dollar and gold has weakened in 2010, with gold prices rising 4 percent since the start of the year despite the dollar's 7 percent climb versus the euro.

"RISK APPETITE HIGHER, VOLUME DOWN

"Prices also received a boost after above-consensus U.S. new homes data lifted appetite for assets seen as higher risk, such as the euro and commodities. Concern over Greece pushed the single currency to one-year lows in earlier trade.

"Wall Street climbed as both the S&P 500 .SPX and the Dow Jones industrial average .DJI closed at a 19-month high.

"However, trading volume in gold has dropped this week, indicating market interest might be fading due to a lack of definite direction in the price of bullion.

"Silver was at $18.23 an ounce against $17.95 late in New York on Thursday, platinum at $1,738.50 an ounce against $1,740, and palladium at $560 against $561.

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  • September 26th - Europe's central banks seen queuing up to sell gold (Reuters)
  • THE YELLOW BOOK - Virtual Metals Research & Consulting and Fortis Bank in a new analysis of the global fundamentals and outlook for the international gold market.
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  • Q2 05 The Hedge Book - Global hedging falls 2.5 Moz to 53.1 Moz
  • The latest edition of the Hedge Book, sponsored by Mitsui, shows dehedging quickened to 2.5 Moz in Q2 05, up from just 1.3 Moz in Q1 05. For the press release and full report click here

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