Gold Retreats As Demand Falls After Global Debt Fears

Gold declined for the first time in three days as concerns eased that banking woes in Portugal will spur a wider debt crisis in Europe, crimping demand for the precious metal as an alternative investment.

Banco Espirito Santo SA sought to calm investors after a parent company missed payment on short-term notes. Foreign lenders’ exposure to Portugal is low and the European Central Bank is ready to support banks, signaling Santo’s troubles are unlikely to cascade in the region, Goldman Sachs Group Inc. said in a note. Yesterday, gold reached a 16-week high.

“There is a slight pullback in gold as the problem in Portugal did not escalate,” Adam Klopfenstein, a senior market strategist at Archer Financial Services in Chicago, said in a telephone interview. “There is also some profit taking.”

Gold futures for August delivery fell 0.2 percent to $1,336.20 an ounce at 10:25 a.m. on the Comex in New York. Trading was 39 percent below the 100-day average for this time, according to data compiled by Bloomberg.

Prices climbed 11 percent this year through yesterday, outpacing gains for indexes of commodities, equities and Treasuries. Investor holdings in exchange-traded products backed by the metal have rebounded this month as turmoil spread in the Middle East and Eastern Europe. Bullion is heading for the longest run of weekly gains since 2011.

via Bloomberg

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza