Gold snapped out of its funk from late last week, albeit moderately, to post a Monday gain. COMEX gold for August delivery jumped $21.50, or 1.4%, to settle at $1,588.40 per troy ounce. Ahead of the European Union summit in Brussels on Thursday and Friday, gold’s strength could be viewed as a sign that the yellow metal’s safe haven status is being incrementally restored. Of course the telltale sign will be how gold acts following that confab.
Amid rumors Moody’s Investors Service is on the brink of downgrading the credit ratings of Spanish banks, gold’s gains were impressive.. The ratings agency recently cut its rating on Spain itself, so a lower rating for Spain’s troubled banks would not be a surprise. Still, that headline sent yields on Spanish and Italian debt soaring once again, putting further downward pressure on oil in the process.
According to the Wall Street Journal, The amount of gold held as security by the Bank for International Settlements fell 7.5% to 19.6 billion worth of Special Drawing Rights for the financial year, the bank said in its annual report. About 9% of the SDR 215.4 billion in customer placements are currently held in gold, while the vast majority of customer placements are denominated in currencies.
ETFs backed by physical gold enjoyed strong days as the SPDR Gold Shares (NYSE: GLD) and the iShares Gold Trust (NYSE: IAU) each gained about 0.7%, though volume was thin across both funds. Bank of America Merrill Lynch published a report today saying that gold remains in a secular bull market and that yellow should rally to near-term resistance at $1,700. Beyond that, BofA said "Longer-term, we expect gold to move to new highs with projected resistance in the 2100-2300 area."
Buyers once again stepped into to keep the iShares Silver Trust (NYSE: SLV) from violating support at $26. On at least three occasions this year, SLV has flirted with $26 only to immediately bounce off that level. The ETF added 2.1% today on light volume.
The other white metals were mixed as the ETFS Physical Platinum Shares (NYSE: PPLT) added a third of a percent on light volume. The ETFS Physical Palladium Shares (NYSE: PALL) fell half a percent on volume that was less than a third of the daily average.
With U.S. equities being taken to the woodshed, it was surprising to see strength among some of the miners, though "some" is the operative word. On light volume, the Market Vectors Gold Miners ETF (NYSE: GDX) added 1.2% while the Market Vectors Junior Gold Miners ETF (NYSE: GDXJ) fell 1%. The Global X Silver Miners ETF (NYSE: SIL) closed lower by 0.6%.
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