Investing.com - Gold futures posted their worst weekly losses of the year last week, as growing concerns over political uncertainty in Greece boosted the U.S. dollar, while a wave of technical selling further weighed.
On the Comex division of the New York Mercantile Exchange, gold futures for June delivery settled at USD1,579.25 a troy ounce by close of trade on Friday.
Earlier Friday, prices dipped to as low as USD1,573.75, the lowest since January 3. On the week, gold futures declined 3.66%, the biggest weekly drop since the week of December 18 last year, when prices tumbled almost 7%.
Gold futures were likely to find short-term support at USD1,566.15 a troy ounce, the low from January 3 and resistance at USD1,639.05, the high from May 8.
Gold prices took cues from the currency market, tracking movements in the euro. Gold remains more sensitive to moves in the euro/dollar exchange rate in the short term than to rising risk aversion, which in the past has been a positive driver of prices.
The euro fell to a three-and-a-half-month low against the U.S. dollar on Friday, weighed by concerns that ongoing political turmoil in Greece could result in the county’s eventual exit from the euro zone.
On Friday, Alexis Tsipras the head of Greece’s largest anti-bailout party Syriza rejected a coalition with Socialists and Conservatives, fuelling concerns over the country’s ability to abide by the terms of its EUR130 billion bailout agreement.
Rating agency Fitch warned Friday that it would place the ratings of all euro zone members on review pending possible downgrades, if Greece was to exit the euro zone as a result of its current crisis.
Speculation over the health of Spain’s troubled banking system and the government’s ability to cut one of the largest deficits in the euro also weighed on market sentiment.
Although gold’s appeal as a safe haven is boosted during times of economic uncertainty, the euro zone’s debt crisis has done little to bolster appetite for the precious metal.
A weakening euro and stronger dollar have weighed on gold instead. The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, ended the week at 80.42, the highest since March 16.
Tepid inflation data out of the U.S. and China also weighed on the precious metal’s appeal as an alternative asset.
The Labor Department said Friday that U.S. producer prices fell a seasonally adjusted 0.2% in April to mark the biggest decline since October.
Data from China, meanwhile, showed that consumer prices slowed in line with expectations to 3.4% in April from 3.6% in the preceding month, staying below the government’s annual goal for the third month.
Further adding to the gloomy trade environment, Wall Street lender JP Morgan Chase revealed late Thursday that a USD2 billion dollar loss will eat into its second-quarter results.
The losses stemmed from trades at the bank’s chief investment office, which took large positions for the bank in credit-default swaps.
Some market participants noted that heavy losses in global equities and other commodities markets accelerated gold’s sell-off, as traders were forced to sell their gold holdings to raise cash to cover losses elsewhere.
Credit Suisse said in a report recently that gold could see further losses if money managers start paring their holdings of commodities and equities in anticipation of a worsening of Europe's financial position.
In October 2008, gold prices tumbled 18% as turmoil in global financial markets led to losses in global equity and commodity markets. The precious metal rallied 23% in the next two months.
Prices came under further pressure after breaking below key support levels, triggering fresh sell orders amid bearish chart signals.
Technical traders expect the next level of support for gold to be at USD1,550 after it broke below USD1,600, the lower end of the price range it had held since early April.
Elsewhere on the Comex, silver for July delivery settled at a four-month low of USD28.88 a troy ounce by close of trade on Friday, dropping 4.21% on the week.
Meanwhile, copper for July delivery retreated 1.3% over the week to settle at USD3.630 a pound.
Copper prices lost ground after Chinese economic data for April printed weaker-than-expected, adding to evidence of an accelerating slowdown.
China’s industrial production grew the least since 2009 in April, increasing by 9.3%. China’s retail sales in April gained 14.1% from a year earlier, compared with estimates of 15.1% and March’s 15.2% increase.
China is the world’s largest copper consumer, accounting for almost 40% of world consumption last year.
A deeper slowdown in China, the world’s second-biggest economy, would impair a global expansion that is already faltering because of Europe’s austerity measures.
Copper is sensitive to the economic growth outlook because of its widespread uses across industries. The industrial metal is regarded as a leading indicator of the global economy.
In the week ahead, investors will be watching developments in Greece as well as the first talks between the new French President Francois Hollande and German Chancellor Angela Merkel, amid fears that Hollande’s focus on growth rather than austerity measures as a means to tackle the euro zone crisis could spark tensions with Germany.
In addition, the U.S. is to produce government data on retail sales and inflation, while the Federal Reserve is to publish the minutes of this month’s policy setting meeting.
Gold investors will be closely watching U.S. data in the second quarter for clues as to the likelihood of a fresh round of monetary easing by the Fed, which could potentially hurt the dollar and support gold.
Wall Street investment bank Goldman Sachs reiterated its bullish stance on the precious metal last week, despite a recent run of losses.
The bank stood by its forecast for a rally in gold this year, saying that the precious metal will advance to USD1,840 an ounce over six months as the Fed embarks on a third round of stimulus in June.
On the Comex division of the New York Mercantile Exchange, gold futures for June delivery settled at USD1,579.25 a troy ounce by close of trade on Friday.
Earlier Friday, prices dipped to as low as USD1,573.75, the lowest since January 3. On the week, gold futures declined 3.66%, the biggest weekly drop since the week of December 18 last year, when prices tumbled almost 7%.
Gold futures were likely to find short-term support at USD1,566.15 a troy ounce, the low from January 3 and resistance at USD1,639.05, the high from May 8.
Gold prices took cues from the currency market, tracking movements in the euro. Gold remains more sensitive to moves in the euro/dollar exchange rate in the short term than to rising risk aversion, which in the past has been a positive driver of prices.
The euro fell to a three-and-a-half-month low against the U.S. dollar on Friday, weighed by concerns that ongoing political turmoil in Greece could result in the county’s eventual exit from the euro zone.
On Friday, Alexis Tsipras the head of Greece’s largest anti-bailout party Syriza rejected a coalition with Socialists and Conservatives, fuelling concerns over the country’s ability to abide by the terms of its EUR130 billion bailout agreement.
Rating agency Fitch warned Friday that it would place the ratings of all euro zone members on review pending possible downgrades, if Greece was to exit the euro zone as a result of its current crisis.
Speculation over the health of Spain’s troubled banking system and the government’s ability to cut one of the largest deficits in the euro also weighed on market sentiment.
Although gold’s appeal as a safe haven is boosted during times of economic uncertainty, the euro zone’s debt crisis has done little to bolster appetite for the precious metal.
A weakening euro and stronger dollar have weighed on gold instead. The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, ended the week at 80.42, the highest since March 16.
Tepid inflation data out of the U.S. and China also weighed on the precious metal’s appeal as an alternative asset.
The Labor Department said Friday that U.S. producer prices fell a seasonally adjusted 0.2% in April to mark the biggest decline since October.
Data from China, meanwhile, showed that consumer prices slowed in line with expectations to 3.4% in April from 3.6% in the preceding month, staying below the government’s annual goal for the third month.
Further adding to the gloomy trade environment, Wall Street lender JP Morgan Chase revealed late Thursday that a USD2 billion dollar loss will eat into its second-quarter results.
The losses stemmed from trades at the bank’s chief investment office, which took large positions for the bank in credit-default swaps.
Some market participants noted that heavy losses in global equities and other commodities markets accelerated gold’s sell-off, as traders were forced to sell their gold holdings to raise cash to cover losses elsewhere.
Credit Suisse said in a report recently that gold could see further losses if money managers start paring their holdings of commodities and equities in anticipation of a worsening of Europe's financial position.
In October 2008, gold prices tumbled 18% as turmoil in global financial markets led to losses in global equity and commodity markets. The precious metal rallied 23% in the next two months.
Prices came under further pressure after breaking below key support levels, triggering fresh sell orders amid bearish chart signals.
Technical traders expect the next level of support for gold to be at USD1,550 after it broke below USD1,600, the lower end of the price range it had held since early April.
Elsewhere on the Comex, silver for July delivery settled at a four-month low of USD28.88 a troy ounce by close of trade on Friday, dropping 4.21% on the week.
Meanwhile, copper for July delivery retreated 1.3% over the week to settle at USD3.630 a pound.
Copper prices lost ground after Chinese economic data for April printed weaker-than-expected, adding to evidence of an accelerating slowdown.
China’s industrial production grew the least since 2009 in April, increasing by 9.3%. China’s retail sales in April gained 14.1% from a year earlier, compared with estimates of 15.1% and March’s 15.2% increase.
China is the world’s largest copper consumer, accounting for almost 40% of world consumption last year.
A deeper slowdown in China, the world’s second-biggest economy, would impair a global expansion that is already faltering because of Europe’s austerity measures.
Copper is sensitive to the economic growth outlook because of its widespread uses across industries. The industrial metal is regarded as a leading indicator of the global economy.
In the week ahead, investors will be watching developments in Greece as well as the first talks between the new French President Francois Hollande and German Chancellor Angela Merkel, amid fears that Hollande’s focus on growth rather than austerity measures as a means to tackle the euro zone crisis could spark tensions with Germany.
In addition, the U.S. is to produce government data on retail sales and inflation, while the Federal Reserve is to publish the minutes of this month’s policy setting meeting.
Gold investors will be closely watching U.S. data in the second quarter for clues as to the likelihood of a fresh round of monetary easing by the Fed, which could potentially hurt the dollar and support gold.
Wall Street investment bank Goldman Sachs reiterated its bullish stance on the precious metal last week, despite a recent run of losses.
The bank stood by its forecast for a rally in gold this year, saying that the precious metal will advance to USD1,840 an ounce over six months as the Fed embarks on a third round of stimulus in June.