Gold Prices Slip on EU Bank Stress Test
Source: Kitco, Debbie Carlson (7/23/10)
"Gold prices are weaker but holding in session trading range."
Gold had started the Americas session firmer, but prices began to decay as time drew closer to when the news would be released. Other financial markets such as equities also moved to flat price ahead of the news. Gold spot price was hovering at $1,189.60, down $4.70 at 13:44 (EST).
According to MarketWatch, 7 out of 91 European banks failed the stress tests conducted by the Committee of European Banking Supervisors. The committee said those seven banks are in contact with local regulators to review the need to raise capital, MarketWatch said.
"The lack of reaction was expected," said George Gero, vice president for RBC Capital Market Global Futures.
Gero said the banks that failed were mostly second-tier banks in Spain rather than any major western European banks.
Gold's break midday came after "disappointed gold holders who thought there might be something in the stress test evened up ahead of the weekend," Gero said.
With nothing bullish for gold in the stress tests, the yellow metal's price should continue to decline next week. Investors have other places to put their money, like equities, he said. Good earnings news from the major automakers like Chrysler-Fiat and Ford are helping to bolster base metals and platinum group metals. He said of all the metals, copper and PGMs are likely to attract investors, rather than gold.
Ralph Preston, market analyst at Heritage West Financial said because gold couldn't carve out new highs for the week on the stress test news "leaves prices technically vulnerable to a sharp selloff as we head into next week."