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Euro-Denominated Gold Hits 6-Week Low

Euro-Denominated Gold Hits 6-Week Low

October 17, 2012 - After an early dip in London trading Wednesday morning, wholesale bullion prices recovered, rising to $1,750 per tory ounce as European stock markets gained and the euro strengthened to its highest levels in nearly a month.

The gain in the euro brought prices for French, German, and Italian investors to buy gold to a six-week low at 1,333 euro per troy ounce. The price level is pegged 4 percent lower than the all-time high for euro denominated gold set on October 1st.

Sydney Alex Thorndike, a senior trader with MKS, said the majority of gold dealers with whom he has spoken feel there is significant support on any pullback in the gold price toward $1,675-$1,700 per troy ounce.

Most of those dealers, and Thorndike aswell, believe long-term macro investment buying and possibly central bank demand would be triggered by prices at these levels as well as a reinvigoration of physical demand in India, one of the world’s largest gold markets.

Commodities were stable on Wednesday as Spanish bond yields dropped overnight following Moody’s announcement that it would not downgrade the credit rating of the debt-beleaguered nation. Spain is widely expected to issue a formal request for a bailout from the European Union in coming days. Recent reports out of Spain indicate the country is closer to such a request.

Spain’s 10-year bond yields eased to their lowest spread above comparable German debt in six months.

UBS strategist Edel Tully wrote in a note that gold and the precious metals complex have been held afloat overnight and this morning by the stronger euro. Tully added that gold’s ability to stay buoyed today will be dependent on foreign exchange moves and risk appetite.

Silver prices extended the recent rally to 1.8 percent after Monday’s six-week low in dollar-denominated silver. A $33 mark was reached in the midday London Silver Fix, but prices retraced in later trading.

Analysts with London market maker HSBC wrote in a note that China’s near-term appetite for gold seems to be waning as bullion imports from Hong Kong slows. Imports of gold bullion from Hong Kong to Mainland China have dropped 30 percent during the month of August, compared with rates from a year earlier.

Daily Updates Archive

Jonathan Monroe

Senior Staff Writer -

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