Gold Slips During Week As Euro Falls Against US Dollar, SEC Goes After Goldman Sachs

Gold Slips During Week As Euro Falls Against US Dollar, SEC Goes After Goldman Sachs

Precious metals plummeted at the end of the week with gold falling to US$1,136/oz, while silver and platinum declined to US$17.70/oz and US$1,689/oz respectively.

On Monday and Tuesday, gold remained steady around the 2010 highs reached last week amid increased physical buying and volatility in currency and equity markets, which prompted investors to pour money into precious metals, now seen as safe haven assets. Investors have been abandoning the euro as the European debt crisis unravelled with Greece and its massive debt taking centerstage, putting pressure on equity markets on the continent and its single currency. Late last week, rating agency Fitch cut Greece's sovereign debt to BBB- from BBB+ after downgrading Portugal to AA with a negative outlook last month. The decision came shortly after President of European Central Bank Jean-Claude Trichet said that the debt-laden country did not require financial aid at this moment.

The move by Fitch made it harder and costlier for Greece to raise sufficient funds in the market, prompting European Union leaders to provide it with a €30 billion loan facility weeks after agreeing on a financial aid package, which would be used as a last resort if the country failed to raise enough money in the market.

Gold then briefly fell below US$1,150/oz as investors paused following a buying spree that sent the yellow metal to 2010 highs at nearly US$1,170/oz. However, gold came back in demand later after investors switched to riskier assets following a positive earnings report from chipmaker Intel (NYSE:INTC) and gains in the euro on Greece optimism following the bailout deal.

More bullish cues were provided by the world's largest consumer India, which said that its demand for the yellow metal has grown further as the country's gold imports increased to 27.7 tonnes in March from just 4.8 tonnes a year ago. Later, however, physical buying declined on lower demand from India as gold prices remained at a high level.

Gold weakened closer to the end of the week, but still managed to remain above the US$1,150/oz level despite a stronger US dollar as precious metals were sought by traders due to concerns associated with soaring sovereign debts in Europe and the US, triggering yet more safe haven buying.

On Friday, gold gave in to the pressure and decline as the American currency remained strong and the euro fell further on investor concerns over Greece's fiscal situation. The spread between Greek and German bonds has reached record levels despite the EU bailout loan agreement.

The yellow metal then slipped to US$1,136/oz after SEC (Securities and Exchange Commission) charged Wall Street's biggest investment bank Goldman Sachs (NYSE: GS) with fraud. GS has a large stake in SPDR Gold Trust (NYSE: GLD), the world's largest gold-back exchange traded fund.

Major mining stocks were in decline this week, posting their biggest losses on Friday. Gold producerRandgold Resources (LSE: RRS) declined from 5,445 pence to 5,125 pence during the week, silver minerFresnillo (LSE: FRES) declined from 880 pence to 844 pence and platinum producer Lonmin (LSE: LMI) fell from 2,111 pence to 2,027 pence.

In the FTSE 250, gold miner Petropavlovsk (LSE: POG) fell from 1,270 pence to 1,240 pence, silver producer Hochschild Mining (LSE: HOC) fell from 290 pence to 288 pence and Aquarius Platinum (LSE: AQP), however, went against the tide, inching from 450 pence to 450.6 pence during the week.

SPDR Gold Trust fell 2.1% on friday's news

http://www.proactiveinvestors.co.uk/companies/news/15660/gold-slips-during-week-as-euro-falls-against-us-dollar-sec-goes-after-goldman-sachs-15660.html
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