Gold slides after weeklong rally
Prices slip despite inflationary headlines as traders swap the metal for stocks.
Updated at 4:44 p.m. ET
Gold prices were falling Monday as investors cashed in on the metal's almost 4% rally last week.
Gold (-GC) for February delivery settled down $16.80 at $1,743.90 an ounce at the Comex division of the New York Mercantile Exchange. Gold traded as high as $1,758.80 and as low as $1,732.20 an ounce, while the spot price was down $23.20, according to Kitco's gold index.
Silver (-SI) finished 7 cents lower at $32.69 an ounce, while the U.S. dollar index was down 0.1% at $78.57.
After steady gold buying from Asia overnight, Western traders took advantage of the price move to lock in gains Monday morning.
Gold was also decoupling from the stock market after the two had been moving in tandem of late. Any sell-off in stocks can prompt gold selling, as investors need to raise cash. On the other hand, if markets head higher and traders want to put more cash to work, they might be more likely to sell gold than a stock up 10% for fear of missing an extended rally.
The latest commitment of traders report for the week ended November 29th showed that total long positions decreased by 28,000 contracts and short positions sunk 21,000 contracts. This means that part of gold's recent rally was due to short covering.
"Speculative financial investors are still showing reticence," wrote CommerzBank. Still, gold prices this week will still be shaped by the sovereign debt crisis in Europe, said CommerzBank.
There are many reports swirling about major financial initiatives to help stabilize Europe. The central banks of several European nations, through the European Central Bank, could lend up to 200 billion euros to the International Monetary Fund, which could then lend that money back to weaker European governments. The Federal Reserve could also be prepping to lend more money to the International Monetary Fund along with the ECB. The ECB could also be lining up 1 trillion euros to buy sovereign bonds if deeper fiscal consolidation among the 17 nations using the euro is agreed upon.
The ECB is also meeting on Thursday. After cutting rates by 0.25% at its last meeting, the expectation is that it could do so again. "Our economists anticipate a rate cut of 25 basis points to 1%," says CommerzBank. "This should lend support to the gold price since the opportunity costs of holding gold will remain low." When interest rates stay lower than inflation rates, currently at 3% for the Eurozone, cash in the bank is worth less, which makes gold more attractive to own.
D-day for the eurozone will start Friday at a two-day European summit where leaders are expected to discuss a plan for tighter fiscal unity, which means there will be legal ramifications if a country doesn't reduce its budget deficit by the agreed upon amount -- a lack of sovereignty for more unity.
Gold will also be held hostage to the U.S. dollar. A strong rally in the currency, either on haven buying or a devalued euro, will pressure gold, while any deep sell-off in the greenback will support gold prices, as the metal becomes cheaper to buy in other currencies.
"The U.S. dollar index appears to be topping out," says Mark Arbeter who also acknowledges that the index could make one final push higher adding short-term pressure on all commodities including gold. However, in the longer term, Arbeter thinks "gold could challenge its all-time highs up near $1,900 an ounce and possibly reach $2,000 an ounce early next year."
Among other gold stocks, Goldcorp (GG) slipped 0.7% to $51.03 after it increased its annual dividend to 54 cents a share.
NovaGold (NG) fell 1.3% to $10.62 after releasing its updated feasibility study for Donlin Creek in Alaska, which it co-owns with Barrick.
Donlin will produce 1.5 million ounces of gold at cash costs of $409 an ounce for the first 5 years of production and then 1.1 million ounces of gold a year for 22 years at $585 an ounce. The gold is split evenly between Barrick and NovaGold. Capital expenditures for the next 5-6 years are $6.7 billion -- $300 million lower than previously reported -- which accounts for the construction of a natural gas pipeline and a big contingency buffer of $1 billion. NovaGold is responsible for half of the expenditures, or $3.35 billion.
Mr Steel? Methinks you might want to research this writer a bit more, LOE.
Ms. Steel is my favorite reporter on all things "gold".
Still awaiting a radical jump to sell, likewise a radical slump to buy.
Copyright © 2013 Microsoft. All rights reserved.
Quotes are real-time for NASDAQ, NYSE and AMEX. See delay times for other exchanges.
Fundamental company data and historical chart data provided by Thomson Reuters (click for restrictions). Real-time quotes provided by BATS Exchange. Real-time index quotes and delayed quotes supplied by Interactive Data Real-Time Services. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by SIX Financial Information.
[BRIEFING.COM] The S&P 500 ended this week with a bang, roaring to a new all-time high on the back of stronger-than-expected economic data, influential leadership, and an ongoing appreciation for the Fed's monetary policy support.
The bullish bias was evident in premarket action as the S&P futures pointed to a higher start without the benefit of any definitive news catalyst. Stocks indeed benefited from a blast of buying interest at the opening bell on this ... More
More Market News
|There’s a problem getting this information right now. Please try again later.|
LATEST MARKET DISPATCHES
- No more Dispatches; here's where to find market news
The Market Dispatches column has been discontinued. Here's where to find the latest stock and business news on MSN Money, and the latest from market writer Charley Blaine.
- Dow falls 59 as late-day gloom kills a rally
- Stocks held back by fiscal-cliff worries
- Stocks suffer worst weekly loss in 5 months
- Dow off 121 as post-election swoon continues
- Dow slumps 313 after Obama's re-election
- Dow jumps 133 as Americans head to the polls
All hail the bull market, which ended the week with a big rally. But it also is starting to look a little like 1987, which suffered an epic blow-out.