Commodities rose yesterday and continued to rise in European trading today. Spot gold prices moved higher as the euro fell due to European sovereign debt concerns.
Spot gold prices increased yesterday and finished the day higher at $1389.31 after opening the day at 1386.00. This was the second consecutive day of gains for the commodity. Yesterday’s trading had low volatility and light volume that characterizes end of year trading.
However, the negative string of news surrounding Europe may be helping to support the price of spot gold as traders look for safe haven assets. This may increase the price of spot gold despite year-end profit taking.
Since last week, Europe has been the target of the ratings firms. Threats to lower the sovereign debt ratings of Belgium, France, Portugal, and Greece have taken their toll on the market. On Friday Moody’s Investor Services downgraded the credit rating of Ireland. Yesterday Moody’s announced the sovereign debt rating of Portugal may suffer a downgrade and will be announced in the first quarter of the New Year. Today Fitch Ratings announced its intention to examine Greece’s credit rating following the political and economic events the country has undergone.
Despite the fiscal difficulties Europe faces, the weaker euro may have in fact prevented a sharper rise in the value of gold. As the dollar strengthens, the price of gold becomes more expensive to those investors who hold currencies other than the greenback, thereby reducing the demand non US investors may have for gold.
Should euro zone troubles continue, we may expect further appreciation in the price of spot gold with the next target the all-time high at $1,431.00.
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Russell Glaser is a Currency Analyst with ForexYard. Russell provides analysis in the FX spot market by employing fundamental research methodologies. In addition to currencies, Russell closely follows the correlation between the Commodities market and the movement of equities. His writings have been published on the ForexYard Trading Blog and associated partner sites. Prior to joining Forexyard, Russell Glaser served as a management consultant in the financial services industry, advising Fortune 100 companies. Russell holds a degree in finance from the Fisher College of Business at The Ohio State University.
