Gold sinks in volatile trading

Prices tumble despite uncertainty in Europe and hints of quantitative easing from the Fed, as a firmer US currency weighs on the metal.

By TheStreet Staff Oct 4, 2011 11:14AM

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


Updated at 3:33 p.m. ET


Gold prices fell sharply Tuesday despite hints of more quantitative easing from Federal Reserve Chairman Ben Bernanke.


Gold (-GC) for December delivery dropped $41.70 to $1,616 an ounce at the Comex division of the New York Mercantile Exchange. Gold traded as high as $1,681.50 and as low as $1,613 an ounce, while the spot gold price was losing $64, according to Kitco's gold index.


Silver (-SI) shed 95 cents to close at $29.83 an ounce, while the U.S. dollar index was up slightly at $79.59 after rallying more than 1% Monday. The dollar has surged 2.5% in the past week, and a stronger greenback makes gold, a dollar-backed commodity, more expensive to buy in other currencies, typically hurting prices.


Bernanke put more quantitative easing back on the table in a speech before the House Financial Services Committee on Tuesday, which paradoxically had a negative effect on gold. The Fed is "prepared to take further action as appropriate," he reiterated. "We never take anything off the table."


Bernanke also said that inflation, now at 3.8%, had begun to moderate. If inflation is stable and unemployment keeps rising, it will be hard for the Fed to find a good reason not to pump more money into the system.


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Typically more quantitative easing -- or QE, as it is called, is good for gold: It weakens the dollar and boosts gold as a haven asset. But it was having the opposite effect for the commodity Tuesday, as investors briefly flirted with stocks.


"I'm not so enthused over here by the price action," said Phil Streible, senior market strategist at MFGlobal. "The safe havens are the dollar, gold, Treasuries and the yen and they all turned lower after Bernanke starting discussing that they were prepared to take further action and the euro and stocks led the rally."


Streible also said many traders would have dumped gold positions after gold prices broke Monday's low of $1,620 an ounce, thinking there was more downside to come. "I think people are still missing that gold is moving higher in the Asian markets at night, and if they start coming in again, its game on" for higher gold prices, he said.


Uncertainty in Europe over Greece's bailout had propped up gold prices in early trading. "Gold looks set to benefit from further flight-to-safety purchases in addition to good physical demand," said an early morning report from FastMarkets.


Greece announced that it will not meet its 2011 and 2012 deficit forecasts and officials from the International Monetary Fund, European Union and European Central Bank, aren't releasing Greece's next tranche of bailout money -- €8 billion -- until mid-November. Reportedly Greece now has enough money to get it through October, but the uncertainty will likely add to volatility throughout markets including gold, most experts say.


"If you start seeing some kind of fiscal responsibility," said Streible, then that would crimp gold buying. But "the problem is there are 17 countries, there are too many cooks in the kitchen over there and they can't agree on a proper recipe," he said.


European leaders signaled that they will make a decision regarding additional aid to Greece in late October, which was later than previously expected. According to a Bloomberg report, European financial ministers are mulling technical revisions for a second Greek bailout, which could mean bondholders will take a bigger hit on Greek debt.

Gold mining stocks were getting pummeled Tuesday. Shares of Kinross Gold (KGC) were plunging 8.2% to $13.01, and Yamana Gold (AUY) was falling 6.6% to $12.51. Eldorado Gold (EGO) was sinking 6% to $15.50, and Agnico-Eagle (AEM) was tumbling 5.9% to $54.91.


Oct 5, 2011 5:50AM

The majority of America is not happy and they’ve lost hope, because regardless of what group you identify with, what color you are or what way you lean politically, you’re losing jobs, falling behind on essential bills, having difficulty putting food on the table and are constantly being accosted by government on all levels.

The challenge is not so much getting people motivated, because you can be assured that as this crisis deepens, millions will have no choice but to head to the streets for the reasons outlined above. The problem we face is that we are dealing with politicians and business leaders who have no other motive than power and money, and they will do anything and everything necessary in order to deflect blame. Thus, they’ll need a scapegoat(s).

When the riots start, and they will, the core motivators for individuals who hit the streets will be similar. Where the difference will arise is who each person or group will blame. Those elites in the upper echelons of our command and control apparatus thrive on hate, confusion and panic, and they will use our own ignorance against us.

When we discuss the coming civil disobedience and unrest in America, we may find ourselves visualizing protests where the people join together to oust a tyrannical government. Be forewarned. This is not the most likely outcome, at least not at the outset. With so many different ideologies in this country, every one of us interprets the problems and directs blame a different way. These differences will be used against us; they’ll be used to turn us against each other.

As has been the case throughout history, and most certainly in recent protests and riots around the world, the powers that be will likely utilize agent Provocateurs to wreck havoc in an attempt to discredit the message of the people. Because of the differing backgrounds and world views at any given rally (especially one like Occupy Wall Street), it wouldn’t take much to create conflicts and clashes. Many of those who will be out in force on October 5th and at the many coming assemblies, rallies, and riots that we’ll see in America’s future will be myrmidons taking orders from their respective political, union or organization leaders. Thus, these engagements will not come without risk. There is always the danger that people will be misguided, misinformed, and misdirected, eventually turning on themselves.


It’s great that Americans are taking to the streets to effect real change. One million people is a big number, despite the media feigning ignorance to the fact the Wall Street protests are even happening. This is how it starts. It is our hope that the people carry through with the original intent of the movement and focus their energy on the problem, unregulated greed and corruption on Wall Street and within the halls of Congress, rather than each other.

Oct 5, 2011 4:49AM
Oct 4, 2011 6:15PM



Continued success to all the men and women standing up for their rights as valued, honest and hard working American workers getting screwed daily by Wall Street and TBTF banks and corporations. The states of Massachusetts, California, New Mexico and Washington have now joined New York in their pledge of solidarity and justice for all. Our movement and message becomes stronger by the day. Keep on fighting these corporate fascists! Operation: "Wall Street Storm" a.k.a Occupy Wall Street will be a total success as this movement strengthens, multiplies and expands across our great nation. Tyranny and oppression will not be tolerated by these fascist oligarchs. God will lead us to victory! We defeated England and we will defeat these un-Godly and corrupt anti-American Aristocrats as well. Thank you and God bless you and God bless America!

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