Gold, Silver Fall as Euro Leaders Set to Meet

by Andrew Burger | May 23, 2012 11:57 am

Gold and silver were down sharply as European Union leaders are due to meet in Brussels tonight. Recent EU monetary policy initiatives have run out of steam and the economically depressing effects of austerity measures are biting, which has led to political turnover amid the EU effectively experiencing its second recession of the past four years.

Spot gold was down 1.66%, bid at $1,542.20 an ounce as of 11:00 a.m. Prices reached only as high as $1,565.60 and as dropped as low as $1,533.50, according to Kitco market data[1]. The London afternoon reference price was set at $1,549, a whopping $33.50 an ounce below Tuesday’s afternoon reference price.

Spot silver was showing a 2.94% loss, bid below $28 at $27.37 an ounce. The morning high as of time of writing was $28.02, with the low reaching $27.04. Wednesday’s reference price was set at $27.76, 31 cents an ounce below Tuesday’s price fix.

Today’s EU summit in Brussels[2] will be the first for new French President Francois Hollande, whose election is seen as adding to the impetus for the EU to take pro-growth and job-creating fiscal and financial actions. No firm policy actions are expected to be announced since today’s meeting is scheduled as preparation for another summit meeting at the end of June.

Reported comments by a former Greek prime minister suggesting that preparations for a Greek exit[3] from the euro are under way prompted a wave of selling of U.S. stocks yesterday afternoon, with the selling continuing in the Asia-Pacific Wednesday morning.

In fact, in a CNBC interview[4], former Greek PM Lucas Papademos said there are no preparations under way in Greece and that he is not aware of any in other eurozone countries or by European banks. He added that he couldn’t “exclude the possibility” that such preparations are being made as a result of renewed political uncertainty in Greece and the euro region, as well as the fear that a focus on implementing austerity measures is driving Greece and other periphery nations into a deeper economic hole.

Yields on perceived safe-haven Dutch, Finnish and German bond yields[5] have reached or are close to reaching record lows as a result.

In the U.S., new-home sales rose 3.3% in April[6], to a seasonally adjusted annual rate of 343,000, the Commerce Dept. reported. The national median price rose a slight amount, to $235,700. New homes represent less than 20% of the housing market, but they have an outsized effect on the economy, with each newly built home creating an average of three jobs and $90,000 in tax revenue per year, according to the National Association of Home Builders.

Gold bullion prices recovered from a four-session low of $1,552 in London morning trading Wednesday as the euro rallied against the dollar, BullionVault reported[7].

“There was no real dip buying” overnight as the Gold Price bottomed, BullionVault quoted one wholesale dealer in a note, “although Hong Kong premiums over benchmark London prices held firm between $1.00-1.50 per ounce Wednesday.”

“Gold is acting more as a risky asset,” according to Soc Gen’s Robin Bhar, “and everything is tumbling this morning ahead of the informal [eurozone] finance ministers meeting [tonight], where nothing good is really expected.”

Gold and silver trusts also were sharply lower.

The SPDR Gold Trust (NYSE:GLD[8]) was showing losses of around 1.6%.
The iShares Gold Trust (NYSE:IAU[9]) was down around 1.6%.
The iShares Silver Trust (NYSE:SLV[10]) was down around 2.6%.

Gold and silver mining ETFs were showing large morning losses.

The Market Vectors Gold Miners ETF (NYSE:GDX[11]) was showing losses of some 1.9%.
The Market Vectors Junior Gold Miners ETF (NYSE:GDXJ[12]) was nearly 3.3%.
The Global X Silver Miners ETF (NYSE:SIL[13]) was around 3% lower.

individual gold mining shares weren’t being spared either.

Agnico-Eagle Mines (NYSE:AEM[14]) was down around 2.5%.
Barrick Gold (NYSE:ABX[15]) was some 0.5% lower.
Eldorado Gold (NYSE:EGO[16]) was down around 2.8%.
Goldcorp (NYSE:GG[17]) was down around 0.2%.
Kinross Gold Corp. USA (NYSE:KGC[18]) was down some 3.5%.
Newmont Mining (NYSE:NEM[19]) was showing losses of around 1.3%.
NovaGold Resources (NYSEAMEX:NG[20]) was down around 3.25%.
Yamana Gold (USA) (NYSE:AUY[21]) was down around 2%.

Silver mining shares were taking big hits as well.

Coeur d’Alene Mines (NYSE:CDE[22]) was down nearly 2%.
Hecla Mining (NYSE:HL[23]) was between 0.75% and 1% lower.
Pan American Silver (NASDAQ:PAAS[24]) was showing losses of more than 1%.
Silver Wheaton (NYSE:SLW[25]) was down around 2.2%.
Silver Standard Resources (NASDAQ:SSRI[26]) was down between 3.8% and 4% or more.

As of this writing, Andrew Burger did not hold a position in any of the aforementioned securities. Adrian Ash of BullionVault contributed to this report.

  1. Kitco market data:
  2. EU summit in Brussels:
  3. preparations for a Greek exit:
  4. in a CNBC interview:
  5. bond yields:
  6. rose 3.3% in April:
  7. BullionVault reported:
  8. GLD:
  9. IAU:
  10. SLV:
  11. GDX:
  12. GDXJ:
  13. SIL:
  14. AEM:
  15. ABX:
  16. EGO:
  17. GG:
  18. KGC:
  19. NEM:
  20. NG:
  21. AUY:
  22. CDE:
  23. HL:
  24. PAAS:
  25. SLW:
  26. SSRI:

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