The gold price plunged below $1,800 per ounce Thursday morning with profit-taking in the gold futures market fueling the sell-off. Gold prices stabilized near $1,790 after the European Central Bank announced “dollar liquidity” measures in cooperation with the U.S. Federal Reserve. With Greece on the verge of default, central banks are furiously attempting to inject confidence into the international monetary system.
On Wednesday, the gold price fell $11.89 to $1,821.81 per ounce amid a rebound in global equity markets and pledges from European policymakers to continue supporting Greece through its sovereign debt woes. The spot price of gold oscillated between $1,815 and $1,835 for most of the day, before closing with a modest loss. Given the recent increase in gold price volatility, yesterday represented a relatively quiet day for the yellow metal.
Silver posted a more substantial loss than the price of gold on Wednesday, as it dropped $0.65, or 1.6%, to $40.45 per ounce. Precious metals equities slid alongside the price of gold and silver, with the Philadelphia Gold & Silver Index (XAU) retreating 1.6% to 214.80. Barrick Gold (ABX) and Goldcorp (GG), the world’s two largest gold companies, sunk 1.8% and 2.4%, respectively. Among silver producers, Hecla Mining (HL) slid 1.5% and Silver Standard Resources (SSRI) tumbled 3.2%. Gold mining stocks moved lower early Thursday on the back of weaker gold prices.
Equity markets across Europe and the U.S. moved considerably higher yesterday as German Chancellor Anglea Merkel and French President Nicolaus Sarkozy reaffirmed their commitment to Greece following a call with Greek Prime Minister George Papandreou. In a joint statement, Merkel and Sarkozy asserted they are “convinced” that Greece will remain in the euro zone and that Greek budget cuts will restore stability to the nation’s economy.
The gold price turned modestly lower and the Dow Jones Industrial Average (DJIA) and euro currency extended their gains following release of the statement. The Dow finished higher by 140.88 points, or 1.3%, at 11,246.73. The euro climbed from near 1.36 to as high as 1.3782 against the U.S. dollar. Risk aversion subsided as well, with the CBOE Volatility Index (VIX) falling 6.3% to 34.60.