Gold futures fall in morning trading, still on track for strong weekly gains

TradingPub Admin | March 22, 2013

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The price of gold futures fell in early trading on March 22, but the metal was still on track to register its largest weekly gains in four months.

Bloomberg News reports that while the commodity did receive upward pressure from the continued fiscal uncertainty that exists in troubled European nation Cyprus, the effect of this was outweighed as investors fled exchange-traded products (ETPs) that have gold holdings. 

Low morning prices
April gold was trading $6.00 per ounce lower at $1,607.80 early in the day on the Comex division of the New York Mercantile Exchange, according to Kitco News.

Other measures of the price of the metal were also lower, as spot gold was down $6.80 per ounce at $1,608.50, the media outlet reports. The London A.M. gold fixing stood at $1,611.50, down from the prior London P.M. fixing of $1,613.75. 

Weekly gains
The fiscal challenges in Cyprus helped push gold prices to their highest in three-and-one-half weeks on March 21, and on the following day, the metal extended these gains, according to Reuters. 

"Cyprus will likely remain the focus for another week until the start of April, when we will see a shift to other economic data," Standard Bank analyst Walter de Wet told the news source. 

Russia recently stated that it will provide the troubled European nation with whatever financial assistance is needed, but no resolutions have stemmed from discussions held by representatives of the two nations, according to Kitco News. 

European Union officials have stated that they are willing to provide Cyprus with the bailout funding it needs to remain in the European Monetary Union, the media outlet reports. Cyprus parliament members were scheduled to vote on a proposal later in the day on March 22. 

Reuters reports that by 11:24 GMT, spot gold was trading at $1,611.36, which put the metal on track for a 1.3 percent weekly gain. The appreciation that gold has experienced in the last several days may seem encouraging, but the potential for the commodity to experience further price increases was being hindered by the opportunity for Cyprus to obtain funding. 

"In general one would have expected prices to be higher but also there's a lot of interest around $1,600-$1,625 in the option market and from the speculative side, so to some extent you are seeing some technicality to the market too," de Wet told the news source. 

Falling ETP holdings
The gold holdings of SPDR Gold Trust, which is the largest exchange-traded fund for the metal in the world, fell to 1,221.26 tons on March 21, the lowest level reached since July 2011, the media outlet reports. 

"The outflows from ETPs obviously don't help as one at least would have expected unchanged to a slight increase in holdings," Ole Hansen, head of commodity strategy at Saxo Bank A/S in Copenhagen, told Bloomberg News. "Some long liquidation is lurking." 

Euro zone turmoil
The 17-nation euro zone is still suffering economic turmoil, and the region's continued woes along with the recently-announced conflict in Cyprus have brought the plight of Europe back to the forefront of investor concerns, according to Kitco News. 

On March 22, it was announced that the Ifo business confidence index was at 106.7 in March from its reading of 107.4 in February, which signified the falling confidence of German businesses, the media outlet reports. Since Germany is the largest economy in Europe, this data could be viewed as particularly significant. 

Now, members of the Cyprus Parliament will need to consider a plan that could potentially require savers to either buy insurance of have their assets froze, and also close the two largest lending institutions in the nation, according to Bloomberg News. 

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