Weaker Dollar Boosts Gold Demand Amid European Sovereign Debt Crisis

A weaker US dollar combined with heightened concerns about Europe's sovereign debt crisis pushed gold prices up on August 15, 2011. Despite stronger equities tempering gold's gains, investors sought the safe-haven commodity as a hedge against economic uncertainty. Technical indicators pointed to a move up, and gold prices held above the $1,730 support level, with the most actively traded contract, for December delivery, trading at $1,756.10 a troy ounce on the Comex division of the New York Mercantile Exchange.

Key Takeaways:

• Gold prices rose $13.50, or 0.8%, to $1,756.10 a troy ounce on the Comex division of the New York Mercantile Exchange, with the dollar easing against a basket of international currencies.
• Investors returned to gold as technical indicators pointed to a move up, said Dave Meger, director of metals trading with Vision Financial.
• Stronger equities kept gold's gains muted, with the Dow Jones Industrial Average rising 156.3 points, or 1.4%, at 11,425.3.
• Investors were watching for news about Europe's sovereign debt crisis and potential developments in the French and German economic governance.
• The Swiss government's consideration of pegging its currency to the euro could benefit gold prices.
• Physical gold held in exchange-traded funds fell by 12.3 metric tons on Friday, but total holdings remain above 2,200 metric tons, according to Barclays Capital.
• Large managed funds, including hedge funds, cut back on their holdings of Comex gold and silver options and futures in the week ended Aug. 9, pointing to an increasingly bearish investor attitude.

Statistics:

• Gold prices rose 0.8% to $1,756.10 a troy ounce after the dollar eased against a basket of international currencies.
• The ICE Dollar Index was recently at 73.829, down from 75.656 late Friday in New York.
• The Dow Jones Industrial Average was up 156.3 points, or 1.4%, at 11,425.3.
• Physical gold held in exchange-traded funds fell by 12.3 metric tons on Friday, but total holdings remain above 2,200 metric tons.
• Silver prices rose 30.1 cents, or 0.8%, to $39.415 a troy ounce.

Sources:

• Dow Jones Commodities News via Comtex, "Comex Dec gold up $13.50, or 0.8%, at $1,756.10/troy oz"
• Dow Jones Newswires, "Weaker Dollar Boosts Gold Demand Amid European Sovereign Debt Crisis"
• Barclays Capital, "Physical Gold Held in Exchange-Traded Funds Falls by 12.3 Metric Tons"
• Commodity Futures Trading Commission, "Money Managers Cut Back on Holdings of Comex Gold and Silver Options and Futures"
• Standard Bank, "Analysts Warn of Bearish Investor Attitude"