Gold gains on European debt fears

Prices get a double-digit lift as investors seek safety.

By TheStreet Staff Nov 30, 2010 11:02AM

thestreetGold © Comstock Images/JupiterimagesBy Alix Steel, TheStreet

 

Updated at 5:08 p.m. ET

 

Gold prices soared Tuesday as investors bought the metal as protection against Europe's debt crisis.

 

Gold for February delivery, now the most actively traded contract, settled up $18.60 to $1,386.10 an ounce at the Comex division of the New York Mercantile Exchange. Gold Tuesday traded as high as $1,391.10 and as low as $1,364.

 

After hitting a 10-week high early, the U.S. dollar index was adding 0.6% to $81.31, while the euro was losing 0.7% to $1.30 against the dollar. The spot gold price Tuesday was rising $18.80, according to Kitco's gold index.

 

Gold prices and the U.S. dollar were rising in a broad flight to safety. The euro broke below the 200-day moving average as investors continued to dump the currency on fears that Europe's debt woes will spread to Italy, Spain, Portugal and Belgium. Despite reassurances that only bonds issued after 2013 would be affected if an insolvent country needed a bailout, current bondholders were still worried they would be on the hook if a country were to take financial aid.

The amount of interest struggling countries have to pay to get a loan were rising across the board. The yield on the 10-year Treasury bond in Portugal rose to 7.28% Monday, as the country sweetened the pot for investors, while the German bund was yielding 2.74%.

 

The Bank of Portugal wasn't helping the euro either, warning in its midyear report that its inability to borrow cheaply from the debt market poses "serious challenges" to its financial system. The lack of money along with new capital rules from Basel III, which requires banks to hold more money in their reserves to help protect against losses, reinforces the "recessionary pressures on economic activity."

 

The uncertainty in Europe was good for gold as investors opted for the haven metal over "risky" paper currencies or volatile stocks. Gold prices were up by double digits, but the U.S. dollar was also benefiting from the flight to safety and the strong currency could temper gold's gains.

 

"If we can close above $1,380, that would change us from sideways to down to sideways to up," says Jeff Friedman, a senior market strategist at Lind-Waldock. "If we have a pullback, I am defiantly a buyer. . . . I am looking at $1,351 and $1,340 and definitely $1,325. I do not believe we are going to break $1,300. . . . I think the low is in for the month of November and December."

 

Friedman says the most important item on the agenda this week for gold will be Friday's unemployment report for November. Briefing.com is expecting private sector jobs to grow by 175,000 versus 159,000 in October. The number "shows the health of the economy in the U.S.," says Friedman, and will directly impact the dollar.

 

Gold and the U.S. dollar typically trade inversely to each other, although investors can buck this trend when the flight to safety heats up.

 

Gold prices are in store for more volatility until the end of the year as sellers contend with bargain-hunters and those wanting to add gold to their portfolio before the new year. During December, traders selling gold future contracts must also deliver physical gold, and buyers must pony up the cash, which increases liquidity and volatility in the market.

 

Gold prices will also take cues from overseas. India reported annualized growth in the July to September quarter of 8.9%, compared to 2.5% growth in the U.S. Growth estimates for the full year have been revised to 8.75%.

 

With India growing at a gangbuster rate, investors are now worried that India and China, also reporting explosive growth, might be forced to raise key interest rates to combat inflation and regulate expansion. Higher interest rates would make it more expensive to borrow money and decrease the country's purchasing power.

 

China and India are both credited with supporting physical global gold demand and being instrumental to higher prices. In the third quarter, jewelry demand grew 36% in India and 8% in China, totaling 285.8 tons, about a third of total identifiable gold demand, according to the World Gold Council.

 

A decrease in purchasing power or personal savings in China and India could damage the countries' historical propensity to buy gold jewelry as gifts during wedding and festival seasons.

 

Silver prices rose $1.02 to settle at $28.21 per ounce on the March contract on the Comex, while copper closed 6 cents higher at $3.82 per pound.

 

Gold mining stocks, a risky but sometimes profitable way to buy gold, rallied Tuesday. Barrick Gold (ABX) rose 2.6% to $51.65 while Newmont Mining (NEM) closed 1.3% higher at $58.83, and Agnico-Eagle (AEM) gained 3% to $80.71.

 

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19Comments
Dec 1, 2010 5:08PM
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OK this $%^& is getting old...TO: all the ignorant, and uneducated who think that President Obama created this mess, Get A Clue!!!!!! These problems started long, long ago.... they did NOT just fall out of the sky.... Obama was elected because people are SICK & TIRED of the GOP(what a joke) and others lining their pockets, while saying they are doing the best for the Country. Obama IS a Good Guy, Doing a VERY hard job, maybe if people like chuckg would support him instead of focusing on propaganda (Obama IS an American, And IS NOT, REPEAT, NOT, a Muslim) we ALL as Americans can turn this country into what it SHOULD BE. If you are not part of the solution, YOU ARE part of the PROBLEM.
Dec 2, 2010 8:50AM
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All Holiday temp jobs. Wait until the end of january. Plus all the so called stimulus temp jobs also lose funding on Dec. 31, 2010?
Dec 2, 2010 1:39AM
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i don't care about the eur. or gold ,and silver--don't have money to buy any anyway--what i care about is fuel,nat.gas,electricity,water,sewer bills,house payments,and to top it off groceries -- what are we , going to do about this ? when we have no money , and can't afford to buy gas to look for work !! 90,000>> the size of a very small city<< go to work and it drives the mkt. up 250 "GO FIGURE" what to do about the 15 million that are still out of work , and now , with unemp. bennies running out --what are our great bankers going to do with the new list of foreclosures coming at em ? it's going to be a thrill to watch this thing go "BANG" in about two months !!  as my dad use to say ( it's going to be kaaa poot )

my thoughts only--backed by nothing but experience !!

        steven

Dec 1, 2010 11:40PM
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The trade off is the discontinuance of Unemployment benefits.

These folks are probably working for a lot less money.

All planned out. In early 1980’s both political parties endorsed and released “Workforce 2000” plans starting with the Fortune 500 companies. Workforce 2000 is Americas contribution to the new global economy. Jack Welch, then CEO of GE designed the model and the rest of the big leaguers followed in his foot steps. I remember it well working for a large aerospace company in So. Cal.
We attended a four hour presentation on how America was going to change. We were to become a service oriented country. How labor intensive work was going to be out sourced. How Chinas average pay scale was a whopping .35 cents per day. The man hours it took us to build one large airplane would be an equivalent cost to the most expensive BMW motorcar. Were all our stock holder excited. The Demographics of America were also explained. Guess what? The Hispanic communities was going to be the major population in the LA basin area. That’s right. See where we are today. All part of the plan and don’t forget, all endorsed by both political parties. Then the whipshooding began. Jack Welch implemented a theme called, “Keeping the Ideas Coming”. Ref. March Fortune 500 article. With the threat, or inevitable loss of our jobs, he started a manipulation cooptation strategy to pick the employees brains and make them think they could compete and save their jobs/asses. The CEO’s and corporate leaders and politicians are raking in all the benefits.
As Americans Change so to speak and our earning power diminishes Americans will eventually take what they can get. Just like other third world counties did. Its Americas turn to become the stepchild.
Wal-Mart has become the new commissary to America.
So when I hear and read about this new economy BS, remember our government has it all under control. The part I have trouble with is if people are not working and or making half of what they use to make, income tax revenue will drop as well. How dose a tax system expect to sustain and pay for basic services, afford a healthcare program and frequent handouts to the world in trouble?
Dec 1, 2010 10:58PM
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Bread Winner of the Family...Making Babies!
 
I was speaking to an emergency room physician this morning.  He told me that a woman in her 20s came to the ER with her 8th pregnancy.  She stated, "my momma told me that I am the breadwinner for the family." He asked her to explain.   She said that she can make babies and babies get money for the family.  The scam goes like this: The grandma calls the Department of Child and Family Services and states that the unemployed daughter is not capable of caring for these children.  DCFS agrees and states that the child or children will need to go to foster care.  
 
The grandma then volunteers to be the foster parent, and thus receives a check for $1500 per child per month in Illinois .  Total yearly income: $144,000 tax-free, not to mention free healthcare (Medicaid) plus a monthly card entitling her to free groceries, etc, and a voucher for 250 free cell phone minutes per month.  This does not even include WIC and other welfare programs.   Indeed, grandma was correct in that her fertile daughter is the "breadwinner" of the family.  
 
This is how the ruling class spends our tax dollars.  
 
Sebastian J. Ciancio, M.D. Urologist,
Danville Polyclinic, LTD
Dec 1, 2010 10:31PM
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Fast Food, you are only partly right. Yes people did elect Obama because they did get tired of the GOP in 2008, but the GOP got elected because they were tired of Obama and the Dems and all their promises they didn't keep. So apparently according to the last election people see the Democrats as the real joke. Not the GOP.
Dec 1, 2010 6:53PM
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I would like to know where the jobs were created. They sure as heck did not create any jobs where I live. They paint such a pretty picture. There are just as many people out of work and looking for work as there has been. Things like gasoline and groceries are costing us more and they think that that is a good thing. $3.21 a gallon for gas already and all they do is drive oil higher. Wall Street is a playground for the rich and to hell with the rest of us.
Dec 1, 2010 5:30PM
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 First, let's stop this whining blame game, as it has proven itself all presidents inherit ills from their predecessors, that withstanding this man who I will never recognize as or present national leader as 'President'.  With that said, 93,000 new jobs equates to about 40,000 in HONEST numbers. More than likely ALL of these jobs are seasonal with about .2 % remaining on the job after the season ends. 
 Then you look at some foreign banker and take his word as there is a work in progress to reverse the plummeted Euro. Now you take the liars and thieves in government, banking and stock market analysts lyng through their teeth as they pad their pockets giving false hope to a floundering nation financially. 
 The Market may hold out through the holidays, with no real jobs (2 Million + unemployed), in out future as our government both local and national continue to sell out the American People to foreign interests for higher profits for the large corporations who whine about only earning a billion dollars for 2010! 
 We cradle the cusp of a third depression (the second has hit us already), with zero recovery in site with the exception of Large Corporate bigwigs and our own elected officials pocketing profits, remaining fat and getting fatter still as the people whom they represent go without the basics to survive.
 So for all you read and believe, and those of you who MIGHT have a penny or 2 in your pocket, (none of us with enough $ to truly invest in our own futures), watch the crisis to only get worse. Only those above in Politics, Stocks, Banking and those Corporate thieves, will benefit!
 Put your money under your Mattress and invest in your right to bear arms, for eventually we will stand up against these greedy thieves and it will clearly not be a small battle!  A Surer thing would be precious metals and guns and ammo!
Dec 1, 2010 5:10PM
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Stocks soaring...Santa Claus rally?? Tell that to the millions out of work, or better still some how "trick" the millions of cold, hungry children in this country into believing things are a-OK. Ring that bell loud Wall Street, maybe you have a bonus check coming soon.

Enjoy if you can. 

Dec 1, 2010 5:06PM
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THE MARKET WILL CRASH THE WEEK AFTER CHRISTMAS WHEN ALL THE PART TIMERS ARE LAID OFF ,WHAT GARBAGE
Dec 1, 2010 5:01PM
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High rollers manipulating the market with their questionable reports.  What happened with the TEMPORARY  jobs of census workers?  How many TEMPORARY workers hired for the holiday season and people on unemployment losing their benefits which shows less on unemployment. 

These reports of the economy getting better is a bunch of s---.

We need to get the leaches and corruption out of government.

I would hate to see what would happen to the jobs market if all the service men were brought home from the wars etc. in other countries.  There are no jobs NOW.  And the idiots in WA who allowed all the companies to send their jobs and companies overseas should have been impeached immediately.

Obama and his corrupt administration should be impeached now...they are giving billions and billions (trillions) away to other countries and American citizens are losing their jobs, homes, going hungry yet we are paying for this corrupt administrations asinine choices.  Enough is Enough.

Dec 1, 2010 3:57PM
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Sleepy 50 pt. increase net over the last week or so.

Dec 1, 2010 3:54PM
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Since when did we decide that 200 pts. is "soaring"?
Dec 1, 2010 3:39PM
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The problem is the new agenda...globalization, the other problem is, not all countries want this BS agenda, so will see, how ever...the future doesn't look good.
Dec 1, 2010 12:43PM
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Wow big fuugen deal,over 90k,and at the same time this week 800k will lose unemployment insurance. And might i add that over one million will not qualify for extensions.Crying

 

So 90k new jobs added this month,thats not even keeping up with the over 200k that are entering the workforce.Lightning

 

All this new hiring is temporary for the holidays ,so i wouldnt get to excited.......

 

I hope better days are ahead..

 

 

 

 

 

 

 

 

 

 

 

 

 

Nov 30, 2010 11:20PM
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The question is,where do you put money to make money.The answer;anywhere but in the stock market,hedge funds,401k,etc.Why?Because money managers are and proven to be No.1 theives,who hide behind the watchful eyes of the government,and legally steal us blind!Gold,on the other hand,is always worth something,and you can control the outcome much better than some hack on Wallstreet.Investors have seamed to lost their faith in these money thieves and hacks,and finally,the day has come when people can have something besides (toilet)paper to hold in their hands and pretend it has value,just like the stock market.
Nov 30, 2010 5:00PM
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The future of the planet looks gloomy, that's for sure!  This story can only end badly as history shows big government will always implode a nation or nations in this case!  All set up by the mortgage crisis created by the FED, Treasury, Gov Policy, and carried out by Wall Street!

Call me crazy, but I have my gold, silver, guns, bullets, seeds and debt paid down!  It doesn't cost me much to be prepared but will cost me and my family everything if I listen the the main stream news and think everything is alright when its not!

Dec 1, 2010 4:33PM
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well the reason they can claim that is because the unemployment pay expired today and when that happens they no longer are counted as unemplyment.

the other reason is we got the dumb ass democrats out and these new guys best do their jobs they were voted in the office to do, the people are the boss they work for us, not the other way around.

the next and biggest issue is to impeach the illegal muslim in the black house and we can get back to normal.  any muslim idiot like obama that does not salute our soldiers when pinning a medal of honor on them is a reall ass.  and muslims are the enemy they want to destroy the american citizen.

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