Why gold prices down may 30 2012

Why gold prices down may 30 2012, spot gold, silver prices 5/30/2012 : The gold price sunk $19.01, or 1.2%, to $1,537.29 per ounce Wednesday morning as European sovereign debt concerns continued to weigh on financial markets. Weakness in the price of gold was also fueled by safe haven buying in the U.S. dollar, which reached its highest level since September 2010 against a composite of foreign currencies. The euro continued to slide against the dollar as well, by as much as 0.8% this morning to 1.2408 – its lowest reading since late June of 2010.

Silver fell alongside the gold price, by $0.45, or 1.6%, to $27.48 per ounce. With today’s sell-off in precious metals, the prices of gold and silver extended their monthly declines to 7.7% and 11.6%, respectively. Furthermore, on a year-to-date basis gold turned lower by 1.7% and silver by 0.9%.

Weakness in the price of gold also put pressure on gold shares, although the sector quickly recouped a considerable portion of its opening losses. The Market Vectors Gold Miners ETF (GDX) initially tumbled as much as $1.37, or 3.1%, to $42.72 per share, but bounced back to $43.47 after a worse than expected report on the U.S. housing market. Pending home sales in April dropped for the first time in four months, by 5.5%, while economists were forecasting no change.

The disappointing housing data helped the broader markets extend their losses as well, with the Dow Jones Industrial Average (DJIA) retreating 1.1% to 12,441.40 and the S&P 500 Index off by 1.2% at 1,316.65. As for the gold sector, notable gold miners in the red included Goldcorp (GG), Kinross Gold (KGC), and Randgold Resources (GOLD). GG fell by 2.2% to $35.54, KGC by 2.5% to $7.92, and GOLD by 2.3% to $78.98 per share.

Investors continued to focus on the political and financial turmoil in Greece and Spain on Wednesday, reflected by strains in their respective financial markets. The yield on the ten-year Spanish government bond climbed to 6.690%, within shouting distance of its 6.779% all-time high from November of last year. The Spanish stock market also plunged to a fresh nine-year low amid speculation that the nation will follow in the footsteps of Greece and Ireland in needing an international bailout.

Oliver Adler, Credit Suisse’s head of global economics and real-estate research, wrote in a note to clients that “In our view, it is increasingly likely that Spain will need to seek external help to support its banking system.”

As for the gold price, Saxo Bank vice-president Ole Hansen contended that at the moment, “Nothing is able to withstand the current dollar strength. The secure government yield levels continue to fall to unbelievably low levels, a clear sign of the stress the financial markets are under.”

“Gold is still stuck in its major $1,520 to $1,600 range,” Hansen added, “and once again it looks like we have to determine exactly how strong that support is.”

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