Gold ETF hits record as metal gains
Gold prices rally after Standard & Poor's cuts its rating on Greece and Portugal's debt.
By Alix Steel, TheStreet
Gold prices are rallying as investors seek safety in the precious metal after Standard & Poor’s downgraded Greece and Portugal’s debt.
Gold for June delivery was surging $6.80 to $1,160.80 an ounce at the Comex division of the New York Mercantile Exchange. Gold rose as high as $1,165.30 and fell as low as $1,146.60. The US dollar index was adding 0.61% to $81.71, while the euro was sinking 0.55% against the dollar. The spot gold price today was topping $8, according to Kitco's gold index.
Standard & Poor's slashed Greece's sovereign credit rating to junk and lowered Portugal's long-term credit rating from A+ to A-.
Gold had been under pressure as today's options expiration triggered some selling. Investors remain cautious before Goldman Sachs (GS) Chief Executive Lloyd Blankfein testifies to a Congressional subcommittee about fraud allegations. The Federal Open Market Committee also started a two-day meeting today.
The Federal Reserve is expected to keep key interest rates at zero to 0.25%, but any signs of inflation concerns could hurt gold prices. Any end to the flow of free money will support a stronger dollar and make gold more expensive to buy in other currencies.
The gold ETF, SPDR Gold Shares (GLD), added more than 6 tons on Monday to a record 1,146.22 tons. The physically backed ETF is a popular way to invest in gold as a trader can own gold without the hassle. Shares were up 0.74% to $113.59.
"For the moment, we expect gold to maintain its current sideways-to-higher trend," says James Moore, an analyst at TheBullionDesk.com, in his daily metal report. "[Gold will be] underpinned by scaled-down physical and investment buying, but still requiring a close above $1,161 to confirm a breakout."
The price of silver was falling 5 cents to $18.28, while copper prices were losing 7 cents to $3.45.
Platinum and palladium were also suffering minor losses, despite better-than-expected quarterly results at Ford (F). The automaker expects to sell 11.2 million cars in North America this year and is taking market share in Asia, Europe and South America. Platinum and palladium are key metals used in car manufacturing. Any ramp up in production could constrict the supply of platinum and palladium, which would support higher prices.
Mining stocks were mixed. Barrick Gold (ABX) was falling 0.6% to $40.23. Newmont Mining (NEM) was down 0.9% to $52.72. Newmont said it earned $1.11 a share in the first-quarter, or 83 cents, accounting for a tax benefit and asset sale. The company expects to produce 6.3 to 6.8 million ounces of gold in 2010.
Large-cap miners Kinross Gold (KGC) and Goldcorp (GG) rose 0.2% and 2.3%, respectively. Shares of Golden Star (GSS) were falling 0.2% to $4.30 after the stock was downgraded by Raymond James from “outperform” to “market perform.”
Shares of Freeport McMoRan Copper and Gold (FCX) were sinking 4.9% to $76.49.
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Stocks drift lower and bonds are hit as investors await the Fed. Prepare for higher volatility this week.
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