Gold futures decline amid rising equities and encouraging economic data

TradingPub Admin | February 5, 2013

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The price of gold futures fell on February 5, responding to economic data pointing to improvement in Europe and equity gains. 

April gold futures trading on the Comex division of the New York Mercantile Exchange settled $2.90 per ounce lower at $1,673.50 during the day, according to Reuters. Preliminary information supplied by the media outlet revealed that the trading volume for the contract was 10 percent below its 30 day average. Spot gold also declined in value, trading down 0.1 percent at $1,671.80 an ounce. 

MarketWatch reports that the April Comex gold contract rose to as high as $1,687 an ounce and fell to as low as $1,667.20, MarketWatch reports. Jason Rotman, president of Newport Beach, California-based Lido Isle Advisors, stated that "technically, we see strong resistance at $1,690." 

The Eurozone Composite PMI produced by market research firm Markit Economics rose to its highest reading in 10 months in January, and Reuters reports that this strong economic data helped to bolster gold prices. 

Reports that the European Central Bank is being repaid for loans it made to regional lending institutions and that the central bank's balance sheet plunged to a one year low also helped to put downward pressure on gold, according to MarketWatch. "This is causing confidence to re-appear in the risk market," Rotman said. 

The importance of key events in Europe was cited by market experts, with Peter Hug, global trading director at Kitco Metals, writing in a note that the upcoming monthly meeting of the European Union will be matched by gold market participants. He expressed skepticism surrounding the region, saying he does not believe that "the European financial issues are behind us." 

Precious-metals strategists at HSBC mirrored the importance of the pending event, stating that "the bullion market may focus on the upcoming European Central Bank meeting and its corresponding euro reaction, we believe," the media outlet reports. 

The rising sentiment surrounding Europe was reflected in the 17-nation euro, and the ICE dollar index, which compares the value of the greenback to the currencies of six of its trading peers, declined to a value of 79.515, from its reading of 79.589 late in North American trading on the previous day, according to MarketWatch. 

Other economic news was credited for bolstering sentiment and pushing gold lower, as the services index provided by The Institute for Supply Management lingered close to its highest reading in a year, even though it fell to 55.2 percent in January from 55.7 percent the month before, the media outlet reports. 

Data provided by the nonpartisan Congressional Budget Office predicted that in 2013, the U.S. federal budget deficit will decline to $845 billion after surpassing $1 trillion for four consecutive years, and Reuters reports that this information impacted the sentiment of gold traders. 

Stocks rose during the day, and the Dow Jones Industrial Average closed 0.7 percent higher at 13,979.30, after rising above 14,000 earlier in trading, according to MarketWatch. The blue-chip S&P 500 surged roughly 1 percent to 1,511.29. 

"It's no surprise to see gold dropping back as stocks rally again," Adrian Ash, head of research at BullionVault, told MarketWatch. However, "independent investors are giving only half-a-cheer to the flood of conflicting economic data." He noted that the optimism surrounding the metal, as measured by the BullionVault's Gold Investors Index, fell from its 12-month high. 

"Savers' anxiety levels have eased but the need for long-term crisis insurance remains clear and present," he stated. 

There are clearly many different variables that are cited by market experts as influencing the market for futures involving assets such as gold. 

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