Gold eases after EU debt containment plan
Tuesday, 11 May 2010
SINGAPORE, May 10 (Reuters): Gold fell more than half a per cent Monday, trading just above $1,200 an ounce, as investors weighed whether a half a trillion euro plan could safeguard euro zone sovereign debt from default.
European Union finance ministers agreed on Monday on emergency measures worth 500 billion euros ($670 billion) to prevent Greece's debt crisis causing turmoil in other euro zone countries.
The measures are worth much more than any previous attempts by the 27-country EU or the 16-state single-currency group to calm what one minister described as the "wolfpack" of the financial markets.
That sent the dollar down 1 per cent against a basket of currencies .DXY as the euro rallied, but it was not enough to completely put investor worries to rest.
"Equities markets have gone crazy. We are up 2 per cent in Australia with this collective sigh of relief about the EU plan. But we are still digesting," said Jonathan Barratt, managing director of Commodity Broking Services in Sydney.
"The risk remains of contagion, but I think once Europe opens we'll see gold get smacked. The EU has finally gotten ahead of the market and done something. They realize contagion would be catastrophic and 500 billion euros is a start."
From a technical perspective, spot gold could retrace toward $1,185.28 or $1,178.65 -- the 50 and 61.8 per cent Fibonacci retracement levels of the move from $1,157.20 to $1,213.35.
Spot gold tumbled more than $18 to a low of $1,195.20 an ounce from Friday's five month high of $1,213.35, according to Reuters data. At 12:50 a.m. ET, gold was quoted at $1,200.50 an ounce.
US June gold futures on the COMEX division of the NYMEX stood at $1,201.5 an ounce versus Friday's settlement of $1,210.40 an ounce.
"The market has been focused on euro zone plans for Greece and the early reaction was positive for riskier assets. This will mean a slowing in the surge in gold," Barclays Capital analyst Yingxi Yu said.
But she added the market still wanted more clarity on the plans and beyond the short term, gold was likely to remain well supported.
The world's largest gold-backed exchange-traded fund, SPDR Gold Trust, said its holdings stood at a record high of 1,188.498 metric tons as of May 7, from 1,185.787 metric tons in the previous business day.
European Union finance ministers agreed on Monday on emergency measures worth 500 billion euros ($670 billion) to prevent Greece's debt crisis causing turmoil in other euro zone countries.
The measures are worth much more than any previous attempts by the 27-country EU or the 16-state single-currency group to calm what one minister described as the "wolfpack" of the financial markets.
That sent the dollar down 1 per cent against a basket of currencies .DXY as the euro rallied, but it was not enough to completely put investor worries to rest.
"Equities markets have gone crazy. We are up 2 per cent in Australia with this collective sigh of relief about the EU plan. But we are still digesting," said Jonathan Barratt, managing director of Commodity Broking Services in Sydney.
"The risk remains of contagion, but I think once Europe opens we'll see gold get smacked. The EU has finally gotten ahead of the market and done something. They realize contagion would be catastrophic and 500 billion euros is a start."
From a technical perspective, spot gold could retrace toward $1,185.28 or $1,178.65 -- the 50 and 61.8 per cent Fibonacci retracement levels of the move from $1,157.20 to $1,213.35.
Spot gold tumbled more than $18 to a low of $1,195.20 an ounce from Friday's five month high of $1,213.35, according to Reuters data. At 12:50 a.m. ET, gold was quoted at $1,200.50 an ounce.
US June gold futures on the COMEX division of the NYMEX stood at $1,201.5 an ounce versus Friday's settlement of $1,210.40 an ounce.
"The market has been focused on euro zone plans for Greece and the early reaction was positive for riskier assets. This will mean a slowing in the surge in gold," Barclays Capital analyst Yingxi Yu said.
But she added the market still wanted more clarity on the plans and beyond the short term, gold was likely to remain well supported.
The world's largest gold-backed exchange-traded fund, SPDR Gold Trust, said its holdings stood at a record high of 1,188.498 metric tons as of May 7, from 1,185.787 metric tons in the previous business day.