Precious Metals

Gold followed the equities lower on Friday, as discord among the G20 leaders on boosting the IMF’s firepower to fight the Eurozone debt crisis led to investor apprehension.

By Leia Toovey- Exclusive to Gold Investing News

Gold followed the equities lower on Friday, as discord among the G20 leaders on boosting the IMF’s firepower to fight the Eurozone debt crisis led to investor apprehension. Gold closed down, $9 at $1,756.10 an ounce at the Comex division of the New York Mercantile Exchange. During the day the metal traded in the range of $1,766.50 to $1,749.80 an ounce.

At the center of the Eurozone crisis was the vote of confidence for Greek Prime Minister George Papandreou. The vote was scheduled for late in the day on Friday. Even if Mr. Papandreou survives the no-confidence vote, his Socialist party and the center-right opposition are pushing him to resign.  This uncertainty forced the euro to give up some of the headway it made against the dollar on Thursday, which was in turn bearish for US dollar dominated gold.

Traders also caution that the fight to save the Eurozone is far from over. Even if the Greece crisis is averted, traders claim that the markets will focus on another struggling European nation: Italy. The whole stability of Europe depends on whether Italy gets its act together,” Commerzbank Chief Financial Officer Eric Strutz told analysts in a conference call on Friday. There is speculation that Italian Prime Minister Silvio Berlusconi may also call a no confidence vote.

On Friday, the bright spot in the global economy was the US jobs rate. The employment report, released Friday, showed that unemployment unexpectedly fell to a six month low. It now stands at 9 percent. Still, the amount of jobs added in October was lower-than-forecast, however, larger gains in the prior two months compensated for October’s short comings. “The risk of the economy falling into a second recession over the next six to 12 months has been reduced, but we still have a very long way to go,” said Ryan Sweet, a senior economist at Moody’s Analytics in West Chester Pennsylvania. Unfortunately, for financial markets, the report was overshadowed by the resurrecting uncertainty in Europe.

Despite gold trading in range bound territory this week, gold traders are bullish for the future. They expect that the Eurozone debt crisis, combined with slow US growth will increase demand for gold as a wealth-protection investment. According to data from the Commodity Futures Trading Commission data, money managers increased their net-long position in COMEX futures by the most since August to 138,846 contracts in the week ended October 25.  Data compiled by Bloomberg showed that ETP holdings rose 23.1 metric tonnes last month, the most since July’s 96.4 tons, and touched a two-month high of 2,281.6 tons yesterday. “The conditions are perfect” for gold, said Mark O’Byrne, the Dublin-based executive director of GoldCore Ltd. “We have unprecedented levels of risk in markets. We still have ultra-loose monetary policy and the debasing of currencies. That’s obviously bullish for gold.” The renewed appeal of the precious metals also impacted silver, with silver speculators upping their net long positions.

On Thursday, gold rallied 1.5 percent as a surprise interest rate cut by the European Central Bank, and renewed safe-haven appeal drew investors back into the metal. Lately, gold has been behaving differently from its traditional safe-haven status, but Thursday’s statement by ECB President Mario Draghi that the Eurozone could subside into a “mild recession” in the latter part of 2011, caused a flight to safety, for which investors turned to gold. Economist Dennis Gartman sees gold prices in euros rallying to a record as the regions sovereign debt crisis will boost demand for the metal as an alternative asset.

Company news

Freeport McMoRan’s Copper and Gold’s (NYSE:FCX) Grasberg Mine, the world’s largest gold mine, is still being impacted by labour disputes. Workers are currently blockading roads, and production has been dramatically scaled back.  This week, the miner was forced into declaring force majeure for its copper shipments. The miner announced this week that production of metals have fallen below the necessary amount for the miner to meet its fourth-quarter sales targets.

 

Securities Disclosure:  I, Leia Toovey, hold no equity interests in any company mentioned in this article. 

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Commodities
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Silver20.36+0.03
Copper3.59+0.12
Palladium2134.00+13.00
Platinum900.50+2.51
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