Gold prices settled higher in trading on Wednesday as uncertainties over the euro zone debt crisis boosted the precious metal’s safe haven appeal. However, gold’s failure to break through a key resistance level several times could spark technical selling.
Worries over the euro zone debt crisis continue to weigh down investors’ sentiment. On Tuesday, yields on Spanish 10-year bonds rose to a euro-era high. Meanwhile, the upcoming Greek election is also keeping investors on the edge.
Gold was also lifted by some weak U.S. economic data, including weaker than expected rise in retail sales for the month of May. The precious metal rose toward $1,625 an ounce following the weak data, which once again raised the prospect of further monetary easing from the Federal Reserve.
Speaking to Reuters, Anthony Neglia, President of Tower Trading and Comex gold options floor trader, said that right now there seems to be a disconnect with gold and the euro. Neglia said that his fear is that if gold doesn’t go above $1,640 an ounce, there could be a $50 to $70 selloff in the coming days.
Technical analysts say that the $1,640 an ounce mark is the next big level for gold to break through. According to Commerzbank, only a break above the current June high at $1,641 will put the 50% Fibonacci retracement of this year’s decline at $1,659.07 an ounce and the May high at $1,672.10 an ounce in gold’s sights.
Commerzbank also said in a report that it expects gold to rise significantly by the end of this year due to a pick up in demand in the second half of the year. The bank expects the precious metal to rise to $1,900 an ounce.
Analysts at Commerzbank said that weak demand for gold in India has been offset by robust demand in China. The bank said that China will overtake India as the world’s largest consumer of gold in 2012. The analysts, however, said that jewelry demand in India is expected to recover after the monsoons.
David Wilson, analyst at Citigroup, told Reuters that Federal Reserve Chairman Ben Bernanke, in comments made to the Congress committee last week, seemed to be intimating that QE was off the table. Wilson, however, said that if Europe continues to drag, the likelihood of QE continues to grow and that in itself should be supportive for gold.
Spot gold prices were last trading 0.51% higher at $1,617.76 an ounce. Gold futures for delivery in August on the Comex division of the New York Mercantile Exchange settled at $1,619.40 an ounce.
The SPDR Gold Trust (ETF) (NYSE: GLD) ended the day 0.44% higher at $157.14, the Market Vectors ETF Trust (NYSE: GDX
) ended the day 0.09% higher at $46.81, and the iShares Gold Trust (ETF) (NYSE: IAU
) ended the day 0.45% higher at $15.77.
In other precious metals, silver edged lower on Wednesday. At last check, spot silver was trading 0.1% lower at $28.91 an ounce. Commerzbank on Wednesday slashed its forecast for silver to $35 an ounce for 2012. Commerzbank cited slower economic growth for the cut.
The iShares Silver Trust (ETF) (NYSE: SLV
) ended the day 0.39% lower at $28.01, the ProShares Ultra Silver (ETF) (NYSE: AGQ
) ended the day 0.89% lower at $42.31, and the ProShares UltraShort Silver (ETF) (NYSE: ZSL) ended the day 1.04% higher at $62.27.
Spot platinum rose 0.83% to $1,459.18 an ounce, while spot palladium fell 0.39% to $617.95 an ounce.
Commerzbank expects platinum to reach $1,750 an ounce by the end of this year. The bank expects palladium to reach $750 an ounce by the end of the year.
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