Gold hits the breaks as the market sentiment improves
Precious fell slightly yesterday as the U.S. housing sector revealed noticeable improvement. Pending Home Sales have risen beyond expectations, thus sowing confidence in the hearts of investors. All major American stock indices made a giant leap to higher grounds as in the example of the S&P 500 which closed at 1098.38 after making a staggering 2.58% leap.
This, as a result of course, put immense downward pressure on precious metals as gold dropped slightly to close at 1223.25 down from opening levels at 1225.25, while silver fell slightly more when it declined from the opening of 18.40 to 18.33.
Silver's slightly sharper fall can be explained as speculation, as this precious metal is one of speculators' preferred tools. On the other hand, poor conditions in the manufacturing sector across the globe (especially China) also have a negative effect on silver; for it is used in industry aside from being a precious metal.
Investors abandoned other safe havens yesterday, as we saw the dollar index drop to 86.70 from 86.79. While on the other side of the scales, the Euro inclined from the opening 1.2227 to close at 1.2246.
While yesterday the market was cooling things off with some profit-taking, today this notion has eased as we see silver reversing its movement to climb upwards after opening at 18.33 to currently trade at 18.38. The metal's movement was ensued by rising Asian stocks, where Nikkei advanced 3.08%.
Overall confidence in the markets seems to be improving, but fears around the European debt crisis and the recent manufacturing sector disappointment still linger. Though oil has gained some ground in the course of morning trading; rising from the opening 73.650 to a current 74.100, gold was unable to make any serious progress and is still trading around opening levels of 1223.35.
Today gold will be tied to two opposing forces; the first upward support to the metal is the expected euro zone Retail Sales which will be the center of attention amid fears that austerity measures adopted by several European countries will be dampening growth and accordingly restraining spending and the recovery. While the second downside pressure on the metal is the data from the U.S. , which is expected to show positive signs from the American labor market and the Services sector ahead of the key jobs report tomorrow; thus trading is expected to be turbulent, with many fluctuations interfering with the normal flow of the market and shall the positive sentiment prevail we see the likelihood for the metal to continue to move south.