Gold prices fell Thursday around the world as investor fears that Greece would default or leave the Euro zone, or both, gave way to hope that coordinated intervention by global monetary authorities could contain and even cure the continent's sovereign debt crisis.
French and German leaders expressed their intent to keep Greece in the Euro zone and not accept its departure as a response to the nation's overwhelming debt burden. The top U.S. treasury official also made an unusual trip to Europe to urge officials to coordinate a rescue for Greece and to assure them of American support.
China, too, said it was interested in buying bonds of another troubled debt-burdened Euro zone nation, Italy, though it said there would be conditions.
The net effect of the actions was to swing the pendulum away from fear and towards hope. Analysts acknowledged the mood change but were quick to express their doubts about the permanence of the market's psychology.
Sentiment has improved tangibly following Merkel and Sarkozy's reassurances yesterday evening that Greece would remain in the European Monetary Union, Jane Foley, a senior foreign-exchange strategist at Rabobank International in London, told Bloomberg on Thursday. That said, it seems that the Euro zone debt crisis is no nearer a solution than it was last week and consequently, despite today's better tone, it is fair to expect the market to remain in a very jittery mood.
Other analysts were more severe in their criticism of the market's mood.
It's the denial stage that's taken hold of all the markets -- (a belief) that everything's going to be fine, the EU and U.S. leaderships can manage to put their economies to rights, VM Group analyst Carl Firman told Reuters. I don't think that is the case, and I think it's only a matter of time before that comes home to roost. The gold price is probably going to benefit from that.
Denial stage or not, investors preferred stocks to bonds or precious metals. The price of the German government bond hit the lowest level in two weeks while equities were up 2 percent or more in Europe, their third consecutive daily gain. Stocks also rose in Asia, and U.S. futures were indicating a positive open.
Gold on the New York futures exchange fell $22.60, or 1.3 percent, to $1,803.90. Gold for immediate delivery declined $12.11 to $1,799.26.
Silver on the New York Futures exchange fell 9 cents, or 0.2 percent, to $40.44. Silver for immediate delivery declined 17 cents to $40.21.