Gold retreats amid optimism that European leaders found a comprehensive plan
Gold retreated today after starting the session, cutting the gains recorded during the week, where the metal is affected by the eased jitters and debt woes, after European leaders were able to provide a comprehensive strong plan to contain the debt crisis and prevent the contagion from spreading into Italy and Spain.
Gold opened in the Asian session at $1724.37 per ounce, and recorded the highest at $1728.22 and the lowest at $1713.87, and is currently hovering around $1715.21 per ounce.
We expected gold to gain ahead of the European summit, as investors demand gold as a hedge against uncertainty, where the measures taken by leaders and the plan provided to markets was able to spread positivity and optimism in the market.
However, gold declined today after European leaders revealed the plan and steps to put an end to the two-year debt crisis, where the private sector agreed to take a voluntary 50% write-down on Greek bonds, while the European Union and the International Monetary Fund agreed to provide Greece with 130 billion euros second bailout up from 109 billions.
Moreover, leaders agreed to raise the expanded powers of the European Financial Stability Facility to one trillion euros, with two main functions detailed; the first on to act as an insurer for new bonds issuance, while the second function is to act as an investment vehicles to finance several operations.
Turning to the critical fundamentals that highlight the session today, confidence figures are expected from the euro-area, while gross domestic product figures are expected from the world's largest economy, with hopeful eyes that growth figures will meet market expectations and show that the U.S. economy grew 2.5% in the third quarter compared with 1.3% in the previous quarter.
Furthermore, the U.S. personal consumption is expected to show strong improvement, which could spread optimism that growth recovered some positive momentum and the pace of recovery shall continue now. In addition, better growth should reflect the effect of the monetary easing pumped by the Federal Reserve, yet will indicate that there is no need for another round of quantitative easing over short-term basis, which could support the bearishness seen on gold today.
The Bank of Japan kept rates unchanged virtually zero at 0.10% to support growth further after the disaster, which hit the nation in March, while the bank also expanded the asset purchases program by 5 trillion yen to a total of 20 trillion yen to aid the country and support growth to gain momentum. The Reserve Bank of New Zealand also kept rates unchanged at 2.50%.
Volatility will still dominate the market and fluctuations are expected, with a possible soon intervention from the Bank of Japan to control the rapid incline seen on the yen, which is currently trading around the all-time record high against the U.S. dollar.
On the other hand, silver gained slightly today after the opening in the Asian session at $33.38 per ounce, and set a high of $33.83 and a low of $33.28, and trades now around $33.50 per ounce, extending the gains recorded earlier during the week.
Among other precious metals, platinum started to recover some of the losses incurred before, to currently trade around the level of $1600 per ounce, yet still cheaper than the shiny metal.
Platinum opened the session at $1595.00 per ounce, and recorded the highest at $1604.00 and the lowest at $1592.50, and is trading now with slight gains around $1596.00 per ounce