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PRECIOUS METALS: Gold 1568.50, Silver 26.89 -
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Tuesday, June 26, 2012 11:10:08 AM
Gold 1568.50, Silver 26.89
- EU Debt Problems Pressure Gold Prices
Jun 26, 2012 By Tatyana Shumsky
--Comex August gold slips 0.6% to $1,579.50/oz
--Rising borrowing costs in Spain, Italy damp investor sentiment
--Traders continue to watch for Comex options expiration later Tuesday
NEW YORK--Gold futures slipped Tuesday as borrowing costs for Spain and Italy climbed and the euro sank below the psychologically important $1.25 level, underscoring ongoing concerns about the European debt crisis.
The most actively traded contract, for August delivery, was down $8.90, or 0.6%, at $1,579.50 a troy ounce on the Comex division of the New York Mercantile Exchange.
European debt auctions by Italy and Spain again signaled investor concern about the euro-zone debt crisis. Italy sold May 2014-dated notes at a yield of 4.721%, up from 4.037%, while Spain sold EUR3.077 billion ($3.850 billion) in short-term debt, paying the highest interest rates so far in 2012.
The debt sales followed the downgrade by Moody's Investors Service of its long-term ratings on 28 Spanish banks and a bailout request by Cyprus for financial aid to recapitalize its banks.
"Another round of bank downgrades means there's another round of assets coming on to the market," said Frank McGhee, head precious metals dealer with Integrated Brokerage Services. He added that the wave of delevaraging among European banks is causing deflationary pressures, which are bearish for gold.
Gold is widely seen as a haven from inflation, and tends to fall out of favor with investors when such risks subside.
The deepening euro-zone debt crisis has pressured gold futures lower as investors continue to wait for new easing measures from central banks before jumping into the precious metals market.
"The market needs to see central banks doing something before there's a sustained rally," Mr. McGhee said.
Gold options trading on the Comex are due to expire at the end of business Tuesday, with the largest number of contracts concentrated at an exercise price of $1,600 a troy ounce.
"With the expiries looming and the beginning of a two-day European Summit, today we expect markets to remain fairly quiet and rangebound," said traders at TD Securities in a note to clients. They expect to see gold prices trading between $1,566 and $1,590, though robust options-related activity could see prices rise to $1,600.
-Write to Tatyana Shumsky at firstname.lastname@example.org
(END) Dow Jones Newswires
Copyright (c) 2012 Dow Jones & Company, Inc.
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