Gold held back by Europe, strong dollar

Prices struggle to gain steam as a stronger greenback keeps a lid on gains.

By TheStreet Staff Oct 17, 2011 12:31PM

Image: Gold (© Anthony Bradshaw/Photographer)By Alix Steel, TheStreetTheStreet

 

Updated at 4:52 p.m. ET

 

Gold prices lost ground Monday as hopes that Europe can contain and solve its sovereign debt crisis faded and as a stronger U.S. dollar dragged on the metal. 

 

Gold (-GC) for December delivery settled down $6.10 at $1,676.60 an ounce on light volume at the Comex division of the New York Mercantile Exchange. Gold traded as high as $1,696.80 and as low as $1,667 an ounce, while the spot gold price was down $9.10, according to Kitco's gold index.

 

Silver (-SI) settled down 35 cents at $31.82 an ounce, while the U.S. dollar index was up 0.8% at $77.21.

 

Hope is key for gold, but hope was fading away on Monday. Eurozone leaders have one week to come up with a viable plan to contain the sovereign debt crisis -- saving Greece, recapitalizing banks and determining the fate of sovereign bondholders.

 

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The original plan for Greece was an additional 109 billion-euro bailout, which had been agreed upon at a July meeting. But that figure is now too small to save the country, leaving eurozone leaders trying to figure out how big of a loss they can force bondholders to take.

 

As a result, officials must consider how to recapitalize European banks to protect them against such losses and how to expand the European Financial Stability Fund, or EFSF, to provide financial support for sovereign nations, bondholders and banks.

 

Although European leaders are committed to coming up with a plan, which was supported by the G-20 over the weekend, they still have to find one, and the devil will be in the details.

 

The disappointment led investors to dump stocks and gold as the two have been moving side by side of late. In recent trading sessions, any hope of a resolution has been boosting the euro, which weighs on the dollar and helps gold prices. The opposite has held true as well, as an ascendant dollar has weighed on gold when the euro falls.

 

This tug of war will likely dominate trading in the week ahead. "Open interest shows traders are in and out at the drop of a hat or remark from Europe," says George Gero, a senior vice president at RBC Capital Markets, "but key numbers stay the same for gold."

 

Demand for physical gold will play a role in the metal's price as well. India's famous Diwali season starts next week, and the festival of lights marks a tradition of gift exchanges and shopping -- particularly for gold jewelry. Buying goods, especially during the first five days of the festival, is considered good luck, and many experts are looking for a ramp-up in physical gold purchases.

 

"For the moment, gold continues to build a base above the $1,650 mark with physical demand, particularly from India," says James Moore, a research analyst at FastMarkets.com.

 

India's impact on gold prices extends beyond the festival season, as investors there may be seeking out a hedge against inflation. "Inflation remains stubbornly high in India, over 9% for the 10th month in a row," says Mark O'Byrne, the executive director at GoldCore, a bullion dealer, "and this is leading to continuing store of wealth demand from Indian buyers."

Gold mining stocks closed lower Monday as equities slumped. Barrick Gold (ABX) finished down 2.2% at $47.20, while Newmont Mining (NEM) fell 1% to $66.20. AngloGold Ashanti (AU) slipped 0.2% to $42.42, and Goldcorp (GG) shed 2.8% to end the day at $47.02.

1Comment
Oct 17, 2011 3:48PM
avatar

OCCUPY TOGETHER is bigger than any political party could ever hope to be! Our movement is far too large to try to politicize into one party's agenda!

We are the 99%'s! The 99% that the world generally doesn't hear much about, or talk about, OR LISTEN TO! We are the regular people of the world! Our movement goes all over the party lines around the world and right back home! Political party's are nothing compared to us!

This is history in the making! Never before have the protests been so wide spread! The 99%'s are letting their voices be heard and showing their strength in numbers. Governments had better listen because we will not be ignored any longer! WE THE PEOPLE ARE TAKING OUR GOVERNMENT BACK!

We will not rest until we end corruption in our government and corporations!

Our own elected officials have tried to belittle us and have called us names. Eric Cantor calls the 99%'s an angry mob, and then back pedals a few days later, after he sees how strong we are becoming! President Obama has backed the protests, sadly however, he offers no new solutions. Mitt Romney described the protests as "dangerous" and "class warfare." Herman Cain, not only told those OCCUPY TOGETHER protesters without a job to blame themselves for being unemployed, but also suggested the protests were a conspiracy "planned and orchestrated to distract from the failed policies of the Obama administration."

THESE ARE ELECTED PEOPLE THAT WORK FOR US! TALKING ABOUT THEIR FELLOW AMERICANS LIKE THAT!! They have refused to do anything to solve the problems, THEY SEE NO PROBLEMS! They do not even see the problems in their own constituencies! They do NOT represent "The People" They have all been bought and paid for by the corporations and are waiting to see who gets the nod to be shipped to Washington D.C.

They see us and yet they still do not listen! WE NEED TO GET LOUDER I GUESS!

Many have stooped to childish name calling and idle threats against the protesters, they have tried putting false words out, saying they were official documents from the Occupy Wall Street protest, trying to convince everyone that we were not organized and they said we were wasting our time because protests don't work, etc., and yet, we all not only persisted, in spite of their constant badgering, lying and false rumors, but, now our numbers are proving that we are doing the right things!

No sane person can deny what we the 99%'s have seen and experienced in our lives! Every person that works to earn a living, will benefit from the protesters efforts!

951 cities to date and this is only since Sept 17th.! Our message WILL be heard! This is snowballing faster than anyone could ever imagine. This will continue to grow as time passes too! Plans have been made into next year for the protests and yes it will be a long cold winter for everyone, but we will not be defeated due to weather or anything else!

Soon the police and governments will resort to violence to try to stop the protests, it has already started in a few cities. Why are they afraid of the people? WHY ARE THEY AFRAID OF HAVING THE PEOPLE ORGANIZE?

This proves that they are trying to stop our message from getting out. This proves that they are afraid that their corruption will be plainly exposed to the world!

They are afraid that the corporatism will be changed back to capitalism. They are afraid that the billions they have invested in elections around the world have been wasted! THEY ARE AFRAID OF BEING HELD ACCOUNTABLE FOR THEIR ACTIONS OF THE PAST! They are afraid that the people will demand justice! They are afraid because they know that they cannot stop us!

Their fears are justified.

They have much to loose and all of us 99%'s of the world are coming looking for them! We the people are looking for justice with a vengeance! You all should have expected this!

We told you this was coming, Why didn't you listen to the warnings?

CAN YOU HEAR US YET?

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