Since the economic situation in the EU was either better or less worrisome last weekend, many investors' felt that market trading was less risky. Therefore, traders tentatively sold gold for stocks. Global stock markets posted modest gains encouraged by the U.S. late-day rally on Friday.
There may be more volatility ahead for gold prices as they continue to take their cue from the risk trade. In the short term, a weaker US dollar could boost demand for gold as the dollar-backed commodity becomes an inexpensive purchase in other currencies; furthermore, any significant pullback could lure in any bargain-hunters looking to buy gold at a discount.
Even though Spain denied rumors last week that it would be the next EU nation to request bailout funds, sovereign debt risk from Spain is waiting in the wings as a gold provocateur. Even though the Spain's yields are on the rise. Bond yields typically rise when a government must sweeten the pot to entice investors to lend the country money. Currently, the yield on Spain's 10-year bond is 4.59% while Portugal's is 5.33%. These levels do not yet compare with Greece's double-digit yield at the height of its' financial crisis, but investors are still worried, and any bad news out of the eurozone would trigger a gold rush as investors buy the metal as a form of money that retains value when paper currencies fail.
Gold bulls are hoping that prices can reclaim and exceed their record high last week of $1,254 an troy ounce. However, gold set that record intraday and settled under $1,250 leaving many analysts wondering if there is any momentum to this gold is bullish movement.
For the Silverbugs and base metal buyers: Monday, silver prices were rising .18 cents to $18.42, while copper was rallying 8 cents to $2.99.
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