New York 28/10/2011 - Gold on the Comex division of the New York Mercantile Exchange ended Friday essentially flat as investors took a breather after the mad dash higher following Wednesday's announcement of a eurozone debt plan.
Gold futures for December delivery closed down 50 cents at $1,747.20 an ounce in New York. Trade ranged from $1,733.00 to $1754.00 in light volumes.
“Things were more civilized today. The markets bounced around without a lot of new drivers. People were also ready for the weekend to start so no one was trading too aggressively,” Sterling Smith, an analyst with Country Hedging, said.
Market participants continue to digest what's actually in the proposed EU debt plan. While details are slow in leaking out, the two most salient components seem to be that the region's bail-out fund (EFSF) will be leveraged up to above 1 trillion euros and that the public and private sector have agreed to take a 50-percent haircut on Greek debt.
“Folks will soon have to face the sobering reality that this won't solve all of Europe's problems. Countries like Italy and Spain are still facing big-time problems,” Smith said.
In fact, Italy’s borrowing cost rose to a euro-era record in today's sale of three-year bonds. This pushed yields even higher as market participants start to wonder whether Europe has done enough to ringfence Italy and its $1.9 trillion bond market from continued EU contagion.
But gold, in general, remains quite well supported as the plan to leverage up the EFSF will pump large amounts of liquidity into the markets and create new inflationary pressures, both of which are highly beneficial to the precious metals, Smith said.
Additionally, gold held nearly all of its gains on Friday and that's in itself is significant.
“There wasn't any large scale retracement or major late afternoon profit taking, which tells me that there solid support for this price,” a US-based gold trader said.
“We will test $1,775 early next week and then consolidate a little bit before challenging $1,800 in the near future,” a US-based gold trader said.
In macroeconomic data, US consumer spending rising 0.6 percent in September from 0.2 percent previously. Personal income edged up to 0.1 percent, reversing a fall of 0.1 percent in August but undershooting analyst expectations of growth of 0.4 percent.
The UoM consumer Sentiment came in better than expected at 58.1 from a previous 57.5 but below a consensus forecast of 60.9. UoM Inflation expectation was in line with the previous reading of 3.2 percent.
As for the other precious metals, Comex silver for December delivery closed up 17.6 cents at $34.715 an ounce. Trade ranged from $34.715 to $35.700.
Platinum futures for January delivery on the Nymex settled up $10.40 at $1,651.80 an ounce, while the December palladium contract ended at $668.35 an ounce, down $1.55.
(Additional reporting by Angela Sharda)