New York 28/07/2011 - Gold on the Comex division of the New York Mercantile Exchange inched lower Thursday as the lack of fresh news out of Washington allowed prices to float along with currency movements.
Gold futures for December delivery closed down $1.10 at $1,616.20 an ounce in New York. Trade ranged from $1,605.00 to $1,622.80.
Most headlines continue to centre on the debt talks taking place within the US Congress, where Democrats and Republicans work on competing plans to raise the country's $14.3 trillion debt ceiling. The Treasury Department has set a August 2 deadline to act or face a possible default.
“Most traders have already placed their bets on how this political theatre will play out. Smart investors have taken some profits and now will lock themselves inside their metaphorical panic room until the storm passes,” a US-based gold trader said.
“Both plans will likely die by midnight [tonight], which means that everyone will have to come back to the table tomorrow to write a brand new bi-partisan proposal. This thing is still a couple steps way from the end-game,” he added.
With Washington mired in political gridlock, global markets looked to the dollar, which was surprisingly strong Thursday at 1.4314, up about a half cent against the euro.
Standard Bank said in a note that the precious metals were dealt a blow by a resurgent dollar.
“This was mostly owing to euro weakness after comments by Germany’s Finance Minister, Wolfgang Schaeuble, that his country was opposed to a 'blank cheque' for the European Financial Stability Fund to buy bonds on the secondary market,” the bank analysts said.
Economist Dennis Gartman, in his daily Gartman Letter, said that the eurozone sovereign-debt crisis could led to additional euro weakness for the rest of 2011.
“The US budgetary problems shall be resolving themselves in the interim, but the political/religious/philosophical differences that have torn Europe into pieces over the centuries will do their work again, tearing at the very fabric of the monetary and political union that so many have tried so hard over the past several decades to overcome,” said Gartman, who added that the euro could trade back down to the 1.2000 level, if not lower, over the course of the next several months.
The greenback also benefited from better-than-expected housing and jobs data. US pending home sales for June rose 2.4 percent against a forecast fall of 1.5 percent, while weekly jobless claims of 398,000 beat a forecast of 413,000.
As for the other precious metals, Comex silver for September delivery closed down 77.4 cents, or 1.9 percent at $39.794 an ounce. Trade ranged from $39.34 to $40.595.
Platinum for October delivery on the Nymex closed down $15.60 at $1792.40 an ounce, while the September palladium contract was off $5.10 at $828.10 an ounce.